USA v Kent Hovind Trial Transcripts (1 of 8)

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF FLORIDA

PENSACOLA DIVISION

UNITED STATES OF AMERICA, ) )

Plaintiff, ) ) CASE NO. 3:06cr83/MCR

vs. ) ) KENT E. HOVIND ) Pensacola,Florida and JO D. HOVIND, ) February 28, 2007 ) 8:35 A.M.

) Defendants. )

______________________________)

TRANSCRIPT OF ORAL ARGUMENT PROCEEDINGS BEFORE THE HONORABLE M. CASEY RODGERS,

UNITED STATES DISTRICT JUDGE (Pages 1 thru 81.)

APPEARANCES:

FOR THE PLAINTIFF: MICHELLE M. HELDMYER, ESQUIRE ROBERT G. DAVIES, ESQUIRE

Assistant United States Attorney 21 East Garden Street, Suite 400

Pensacola, Florida 32502 FOR THE DEFENDANT ALAN S. RICHEY, ESQUIRE KENT E. HOVIND: Alan Richey, P.A. 331 Sentinel Firs Road, #A Port Hadlock, Washington 98330 FOR THE DEFENDANT JEROLD W. BARRINGER, ESQUIRE JO D. HOVIND: Jerold W. Barringer,P.A. 102 South Pine Street

Nokomis, Illinois 62075

Gwen B. Kesinger, RPR, FCRROfficial United States Court Reporter

Pensacola, Florida 32502

2

1 (Court in session.) 8 : 3 2 A M

2 (Defendants present.)

3 THE COURT: Good morning. We're here this morning for

4 oral argument which was ordered in response to a motion for

5 reconsideration that was filed by both defendants relating to

6 the Court's order denying the renewed motions for judgement of

7 acquittal. The Court required supplemental briefing, which all

8 parties have provided, and I'm now ready to hear argument.

9 Mr. Richey, do you wish to proceed or Mr. Barringer?

10 Both of you have motions pending for reconsideration.

11 MR. RICHEY: Yes, Your Honor, Mr. Barringer would

12 begin.

13 THE COURT: Mr. Barringer, please approach the podium.

14 I do want the record to reflect that both defendants

15 are here in the courtroom as well.

16 MR. BARRINGER: Thank you, Your Honor.

17 May it please the Court.

18 THE COURT: Yes, sir.

19 MR. BARRINGER: We have consistently argued in this

20 case that the indictment with respect to Counts 13 through 57

21 never really stated a cause of action. The Court initially, in

22 dealing with the motions to dismiss that were filed back in

23 September of this past year, ruled in part that it was too late

24 to file those motions but also argued that -- or held that

25 where the government was at was an accurate position. But even



3

1 in those documents, we were saying the same sorts of things 8 : 3 7 A M

2 that we began to say throughout the process of the trial up

3 through closing arguments which was that Counts 13 through 57

4 didn't state a cause of action.

5 THE COURT: Can I stop you just a moment? We're

6 just -- and I'll do this periodically, forewarning.

7 Would you agree with me, however, that as to those

8 original or initial motions to dismiss that the argument was

9 not as fully presented as it has been as of late?

10 MR. BARRINGER: Absolutely. I don't think there is

11 any doubt that we -- I think everybody in this case has grown

12 in this issue, I believe, from rereading everything, looking at

13 the Court's orders, looking at the whole process, I think

14 everybody has expanded their thought process on what

15 structuring means and how a count can or cannot be structuring.

16 THE COURT: Okay.

17 MR. BARRINGER: But -- and I will continue on with the

18 process, that we in the process of the trial -- we saw where

19 the jury instructions were. The defendants filed objections to

20 the jury instructions. We saw what the government's case was.

21 I cross-examined agent Evans in particular on whether or not

22 the counts required each other's help to get over a $10,000

23 limit to whether they required additional checks per counts to

24 get over a $10,000 limit. Those were specific questions

25 because I had in my mind at the time the same argument that we



4

1 are still dealing with today which was if you don't allege a 8 : 3 8 A M

2 structured transaction that exceeds the $10,000 amounts and I'm

3 not -- and again, I'm not making an issue of whether or not the

4 bank had a reporting requirement because that's not really what

5 the issue is. As the Supreme Court defines structuring in the

6 Ratzlaf decision and as the cases that talked about that say,

7 it really is an issue, where -- as Ratzlaf says on 136, It is

8 illegal to structure transactions to break up a single

9 transaction above the reporting threshold into two or more

10 separate transactions for the purpose of evading the financial

11 institution's reporting requirements.

12 And when you look at what those words really are

13 saying, it is that somebody has more than $10,000 that they

14 don't want the bank to know -- or they don't want the IRS to

15 know, so they figure out ways in the process of dealing with

16 the case that they are in of how to avoid that $10,000 amount.

17 It's not one whether or not the bank has an obligation to file

18 the report or not. If they had dropped the 10,000 or more in

19 the bank would have, and every case says that, that if you

20 bring in more than 10,000 or take out more than 10,000, the

21 bank files a reporting requirement. Every case that the Court

22 cited to and that the defense cited to and even that the

23 prosecution cited to dealt with the issue that there were

24 multiple transactions in excess of the 10,000. Even the Shirk

25 case where the government argues that 9,000 was Counts 2 of



5

1 that. When you look at it -- or 8,000, 8,000 was Count 2 of 8 : 4 0 A M

2 the Shirk decision. When you look at it, what it really is is

3 8,000 of 50,000. So Shirk was trying to figure out how not to

4 let the government -- the IRS know about $50,000 and brings in

5 8,000 and the wife comes in -- and the wife is then told that

6 day, if you don't bring it all in, we're going to report it

7 anyway, so she brings in $40,000, which triggers a reporting

8 requirement. Every case says it's more than $10,000, but the

9 government is working on a theory here, and the government

10 phrases it in several of the pleadings that it is, in fact, a

11 theory that on a use case, and they define the use based upon

12 the Coney decision another reported federal court decision out

13 of the Eastern District of Louisiana, they are saying that a

14 use case doesn't require more than $10,000 at all.

15 THE COURT: Well, let me stop you here, Mr. Barringer.

16 The cases that we have all sort of focused on, those that are

17 most widely reported are structuring cases that involve

18 deposits.

19 MR. BARRINGER: Yes.

20 THE COURT: Which we don't have in this case.

21 MR. BARRINGER: Right.

22 THE COURT: And I believe that the regulations are

23 clear that the transaction is not limited to a deposit.

24 MR. BARRINGER: Well, and while I agree that the

25 regulation says that, I don't know whether that makes a



6

1 regulation fit within the statute or not, but that's not really 8 : 4 1 A M

2 the issue here either, at least in terms of what we're dealing

3 with in the bigger picture today because in my first motion --

4 in my motion to reconsider, I said, notwithstanding the issues

5 of whether it's withdrawal versus deposit, whether it's PRA

6 issues, a variety of other things --

7 THE COURT: But that's important though because,

8 again, you referenced these other cases including Ratzlaf that

9 involve a different set of factual circumstances than we have

10 in this case, and I would like to get an acknowledgment from

11 the defense, at least sort of out of the gate here, that we do

12 have sort of a different set of circumstances than was present

13 in, I believe, every case that we've seen. I mean, do you know

14 of a case that involves a structuring prosecution involving

15 withdrawals, simply withdrawals from a bank account without any

16 evidence of the lump sum deposit?

17 MR. BARRINGER: Okay. Without the evidence of a lump

18 sum deposit, I would say, no, and I think that is in fact where

19 the problem is here with the government's case.

20 THE COURT: So you have to have the lump sum deposit

21 before you can have a successful -- or viable prosecution for

22 withdrawals.

23 MR. BARRINGER: You have to have an amount greater

24 than the 10,000, whether withdrawal or deposit in order to have

25 a successful prosecution. The government's case really is that



7

1 it doesn't matter what you take out of the bank, literally, 8 : 4 3 A M

2 what -- no matter -- I have $9,000 in my account -- actually, I

3 have $10,001 in my account. I want 9,000 because that's how

4 much I need. This is the government's position in I think

5 Document 181, the last response. It doesn't matter what I need

6 the $9,000 for. It doesn't matter that I only need the 9,000.

7 If I have $10,001 there, I have to take all $10,001 or I've

8 structured a transaction, and that's what they have alleged

9 here and that's the position they've taken in their last

10 document. That is not the law. It is an interesting theory of

11 where they are going. They rely upon Coney to try to get

12 there, but Ratzlaf makes clear it's two or more transactions,

13 period.

14 THE COURT: Okay. I'm glad you brought that up.

15 Ratzlaf and other cases seem to make that clear, that two or

16 more transactions is required -- what's required. But do you

17 agree with me that the regulation refers to one or more

18 transactions?

19 MR. BARRINGER: Well, it does say that. It says

20 transaction or transactions is actually how it's phrased.

21 THE COURT: No, I think the word one is in the

22 regulation, one or more transactions.

23 MR. BARRINGER: And I think what it really is is a

24 question of what the phrase transaction means.

25 THE COURT: I do not disagree with you. I agree with



8

1 what you've just said. I think that's an important question in 8 : 4 4 A M

2 this case, and I think that that is sort of the starting point

3 for where a lot of the confusion has arisen with respect to

4 this argument is what -- what is the transaction --


6 THE COURT: -- that's involved here that we're

7 analyzing.

8 MR. BARRINGER: And the Court is I think right on

9 point with this because some of the cases define transaction as

10 being the overall picture of the process and some of them look

11 at the transaction as being what I would call the act of taking

12 money out or putting money in and breaking those two apart and

13 running them in different directions or looking at the

14 regulation, which doesn't really define that process of whether

15 it's the act or the process of there being discussed, you get

16 muddled in the language. In fact, there are different parts of

17 that regulation 103.22, which is not specified in its breakdown

18 in the indictment as to which parts they are talking about.

19 Different parts of the regulation mean different things. Some

20 of them deal clearly with where Ratzlaf was at and some of them

21 are where Shirk is trying to say or what Coney is trying to

22 say. So then you have a question of whether or not the

23 regulation fits what the statute says. The government makes an

24 argument that -- and one that's accurate with respect to the

25 statutory analysis, you look at the statute, you give effect to



9

1 the words, what do the words mean, apply those words to what 8 : 4 6 A M

2 we're talking about. And if it's clear and unambiguous, you've

3 got it made. But then when you get to the regulations, they

4 switch in the actual sentences, they go from one that deals

5 with statute to the second that deals with regulations, and I

6 try to apply that the same rationale to the regulation, which

7 isn't written by Congress, first of all. It's written by the

8 secretary. And then it is confusing and actually, I believe,

9 self-conflicting within all of 103.22, and you come out with a

10 conclusion that nobody knows what that regulation really means

11 in terms of how it applies to structuring. When it says

12 transaction or transactions or a single transaction, I believe

13 they are talking about the overall process. The idea of what

14 Ratzlaf calls the structure act, structure transaction of two

15 or more transactions, I believe that's what it means when you

16 say the word transaction within the regulations, because

17 otherwise what are you evading and what purpose are you trying

18 to do? If you take $5,000 out of the bank, the government can

19 say that's structure. If you take six or seven or eight or

20 nine, you just take it out of the bank, period, the government

21 says in its rationale that we can look at that and if we think

22 it structuring, we can allege structuring without any regard to

23 5313(a).

24 THE COURT: But isn't the government really

25 focusing -- I don't think it's as simplistic as you suggest. I



10

1 mean, isn't the government really focusing on the evidence of 8 : 4 7 A M

2 intent to establish the structuring? If there is evidence from

3 which the jury could reasonably conclude that the intent was to

4 evade the reporting requirements or to evade those CTR

5 requirements and the person conducts the transaction, writes

6 the check, fills out the deposit ticket in a manner designed to

7 evade those reporting requirements, then that is the

8 structuring.

9 MR. BARRINGER: That's the government's argument, yes.

10 THE COURT: But that's not as you've just suggested.

11 I mean, there is a little more to it than just simply

12 withdrawing $5,000. The intent has to be present.

13 MR. BARRINGER: And I agree with that.

14 THE COURT: Okay.

15 MR. BARRINGER: But to say that it is a structured

16 transaction because you've taken money out and you have an

17 intent still doesn't get 5324(a)(3) matched up with 5313(a),

18 which is part of 5324(a)(3), as is defined by the indictment

19 itself where it talks about both statutes as part of what is

20 alleged. The government has effectively said 5313(a) means

21 nothing for purposes of this case, but that's not true because

22 the structure of 5324(a)3 means you're doing it to avoid

23 5313(a), as the statutes, as the case law all match everything

24 together. It's clear that in doing a 5324(a)3, structure a

25 transaction to avoid the reporting requirements, you're really



11

1 talking about what 5313(a) gets to, which is the $10,000 8 : 4 9 A M

2 amount.

3 THE COURT: But the case law is clear that under a

4 structuring prosecution, at least the case law in this circuit,

5 that under a structuring prosecution under 5324, you do not --

6 it's irrelevant whether the reporting requirement was ever

7 triggered.

8 MR. BARRINGER: Well, okay. Let's look at what that

9 means because the Court has referred to that numerous times.

10 And think about the process for just a moment. I have, as the

11 Supreme Court and even as a Senate talked about in its

12 discussions on that, I have $18,000. I do two $9,000 checks.

13 Now, it's irrelevant that the bank didn't have to do anything

14 with respect to that example. I think everybody would agree.

15 The bank didn't have to do anything with that. It didn't

16 trigger the banks reporting requirements. I had $18,000. I

17 did two $9,000 withdrawals or deposits, and I have my money

18 structured. But that doesn't mean that the $10,000 amount was

19 irrelevant because the $10,000 amount is the relevant issue

20 here, the relevant point.

21 THE COURT: Why -- is it relevant to intent? Is that

22 your position?

23 MR. BARRINGER: It is the -- what they phrased as the

24 actus reus part of the statute. It's critical that it be

25 10,000 that's structured in order for it to be a structure



12

1 period. That's what Ratzlaf really says with respect to the 8 : 5 0 A M

2 actus part, the physical activity that you're doing. Without

3 regard to the mental side of it, you have to structure more

4 than 10,000 in some way for it to be a structure. That is what

5 Ratzlaf says. You apply the mental side of it and then you

6 have an issue of, okay, when they talk about innocent activity

7 versus criminal activity, and that's what it said it was going

8 with its $18,000 example. A little old a lady comes in and

9 takes out 9,000 this week and realizes that she needs 9,000

10 next week and gets it in cash, did she structure it or was

11 innocently doing something? And that's where the mental side

12 of it comes in. Did she know the bank's reporting

13 requirements? Was she specifically intending on trying to

14 avoid them? The point was, at the Senate level at least as

15 well, that it's over 10,000 that's critical. That really was

16 where we were going in our defense the whole time. We looked

17 at what they alleged.

18 THE COURT: Well, let me -- you didn't say it like

19 this.

20 MR. BARRINGER: I agree.

21 THE COURT: Just so that's clear. I mean, this has

22 been, as you've said at the outset, an evolving issue from, I

23 guess, the time of the motions to dismiss.

24 MR. BARRINGER: Yes. It's been something that -- my

25 looking at the indictments caused me to go, so what am I



13

1 missing here? And I've said that forever. What am I missing 8 : 5 1 A M

2 that I'm not getting, which was the reason for the questions of

3 Special Agent Evans? Is there something more the government is

4 attempting to prove to try to get over 10,000? Well, the

5 answer is, no. The government admits that the grand jury

6 couldn't have found anything more in its arguments of how this

7 case proceeded, that $9,500 or $9,600, those are the entirety

8 of each count, no extra checks, no extra facts, no extra money

9 in the account, nothing else is alleged, just $9,500 or $9,600.

10 When you look at how these accounts are written, even the issue

11 of multiplicity can't come in because there isn't any bigger

12 picture to work from. Each count will either stand or fall on

13 what the law is as we know it right now, and certainly in my

14 opinion, they all fall.

15 THE COURT: Well, the reason the Court has referred, I

16 guess, on several occasions but most notably in its order

17 denying the renewed motion for judgement of acquittal, to the

18 fact that it is irrelevant whether or not the reporting

19 requirement had been triggered is because that's the argument

20 that at least Mr. Richey had been making, is that how could the

21 defendants be liable when the bank never had a duty to file a

22 report in the first place. And I had seen that argument made,

23 and I've heard it made and it's been made in writing as well.

24 And the Phipps case makes clear that that is irrelevant for

25 purposes of a prosecution under 5324. I understand your



14

1 argument now about the actus reus part of the crime, and I 8 : 5 3 A M

2 appreciate the argument that you're making, but that is why the

3 Court referenced Phipps in its order and that was because the

4 argument that was being made to me and in fact even this Cure

5 case was argued and cited by Mr. Richey, and I'll discuss this

6 with Mr. Richey in a little bit, but was cited by Mr. Richey in

7 his -- I believe it was his motion, renewed motion for

8 judgement of acquittal. In Cure -- and that that argument is

9 no longer a viable argument since the enactment of 5324.

10 MR. BARRINGER: I don't disagree with that. I don't

11 know that the argument, and I don't think I can paraphrase back

12 exactly as the Court phrased it, but it's irrelevant whether

13 the bank had a duty to file a report at all. And I don't know

14 that that's necessarily in disagreement with what we're really

15 saying. Because if you look at Count 13, which is $9,500, did

16 the bank have a duty to do something with just a $9,500 check?

17 No. But does it fit within the category of what I define as

18 the necessary physical activity for a structured count? No.

19 And the arguments are really -- when we look at what the

20 instruction says, with what the indictment says, with what the

21 evidence showed, and with what we were arguing, we were really

22 saying this: That the bank -- or that the government never

23 showed that the Hovinds ever did anything that would ever

24 have -- if they hadn't structured it would ever have triggered

25 it. By simply saying $9,500, you could never have ever said



15

1 the bank had a duty because the bank never would have had a 8 : 5 5 A M

2 duty with just $9,500.

3 THE COURT: That's the argument that is no longer a

4 viable argument. It doesn't matter whether the conduct would

5 have caused the bank to file the report or not under 5324.

6 MR. BARRINGER: And I don't disagree with that. But

7 when you look at just a $9,500 check and then look at it from

8 the standpoint of does it meet what I've defined as the actus

9 part of it that it has to be more than $10,000, it never could

10 have. So the bank never could have had a reporting

11 requirement. We, as we've said, we've evolved in how we

12 understand what this means, but we were saying the same thing

13 even then, that none of these counts ever stated a cause of

14 action because none of the counts ever alleged more than the

15 $10,000 amount, having been triggered, regardless of the

16 intent, regardless of anything else, regardless of whether the

17 bank had an obligation because we say the bank did have an

18 obligation, and it doesn't matter. Regardless of that, we

19 never got above 10,000. That is the crux of the issue. And no

20 case that I have seen until we got here has -- of course, I

21 haven't looked at all these other cases, necessarily -- but

22 none of those cases have ever said just less than 10,000 all by

23 itself is enough. The government suggests that Shirk says

24 8,000 or some of these other cases, but when you look at how

25 the counts are structured, and I don't remember which one it



16

1 was now, but one of them had it where it was Counts 2, 3 and 4 8 : 5 6 A M

2 each.

3 THE COURT: Nall, the case I believe is Nall.

4 MR. BARRINGER: Nall, 2, 3 and 4 were 9,000, 9,000,

5 9,000, and they said, no, it was all one count, and then there

6 was a second count there -- or a last count there that was also

7 sitting by itself, but even that count had more money than

8 10,000, even if all they accomplished was a portion of that.

9 And that really is the issue. It's got to be more than 10,000,

10 regardless of how much they accomplished before they were

11 caught.

12 THE COURT: You're right. I mean, these cases were

13 not discussed at any point during the trial before or during

14 the trial. In fact, the cases that were presented to the Court

15 or offered to the Court were the Cure line of cases, which are

16 irrelevant under 5324. Davenport was never mentioned until the

17 date of the sentencing.

18 MR. BARRINGER: That's right.

19 THE COURT: And that's sort of what has spawned all of

20 this. So, yes, we have all become much better educated in the

21 time since the sentencing on this issue.

22 Would you look at the regulation with me? Do you have

23 a copy of it?

24 MR. BARRINGER: I don't have that in front of me. I

25 have portions of it.



17

1 THE COURT: Well, do you have maybe a case that quotes 8 : 5 8 A M

2 the. . .


4 THE COURT: I'm looking at Nall, it quotes it, many of

5 them quote the regulation.

6 MR. BARRINGER: I have my Nall decision, Your Honor.

7 THE COURT: All right. Page, it's six of my Westlaw

8 draft copy, Footnote 7.

9 MR. BARRINGER: I'm sorry. What?

10 THE COURT: Footnote 7. It refers to the regulations.


12 THE COURT: In a case the court says the regulations

13 parallel the provision -- I'm reading from the text now, but

14 parallel the provisions of 5324 in prohibiting structuring to

15 evade the reporting requirements. And the regulations also

16 give a regulatory definition of structuring, and then Footnote

17 7 contains the definition of structuring in the regulation.

18 And it does state here in the regulation where a person

19 conducts or attempts to conduct one or more transactions.


21 THE COURT: Can you reconcile that with the Ratzlaf

22 definition --

23 MR. BARRINGER: No.

24 THE COURT: -- definition?

25 MR. BARRINGER: I cannot. I do not believe that this



18

1 regulatory definition really would stand muster if put against 8 : 5 9 A M

2 Ratzlaf. I think that in trying to anticipate all possible

3 issues, I think the Department of Treasury, the Secretary,

4 created some issues here that simply do not stand statutory

5 muster with respect to whether or not they fit what the statute

6 is saying.

7 THE COURT: All right. I have another question for

8 you. The language -- let me see if I can put my hands on it.

9 The language that the Court used in modifying the jury

10 instruction after Mr. Richey's closing -- I have the jury

11 instructions with me.

12 MR. BARRINGER: I do have my jury instruction that was

13 filed with the court.

14 THE COURT: It's probably sitting on my desk. Will

15 you read the last sentence, the modification that was made,

16 will you read that now?

17 MR. BARRINGER: Yes. And it reads this way: The

18 transaction or transactions need not exceed the $10,000

19 reporting threshold at any single financial institution on any

20 single day in order to constitute structuring within the

21 meaning of this definition.

22 THE COURT: Would you agree with me that that language

23 has no impact or relevance to the issue we're discussing now,

24 that that language refers to the actual, in this case, would be

25 the withdrawal, that that amount does not have to exceed



19

1 $10,000? 9 : 0 1 A M

2 MR. BARRINGER: No. And I think -- well, we obviously

3 objected to this language coming in. I don't know that it

4 effectively changed what our argument was with respect to --

5 the $10,000 threshold level is what we looked at, did somebody

6 structure transactions to avoid that in some way, shape or

7 form?

8 THE COURT: But I read that, Mr. Barringer, as

9 referring to the transaction itself, the transaction --

10 MR. BARRINGER: Okay. I understand.

11 THE COURT: The transaction that was structured, not

12 the greater sum, if we'll use the lump sum definition, but.

13 MR. BARRINGER: We're talking about the individual act

14 now transaction that we've talked about a little bit already.

15 THE COURT: Exactly.

16 MR. BARRINGER: And I agree that this accurately

17 states that, that an individual act as part of an overall

18 structuring could be less than $10,000. In fact, it would have

19 to be.

20 THE COURT: Isn't that what that says?

21 MR. BARRINGER: Yes, I think it is.

22 THE COURT: That doesn't, then, have any relevance to

23 the argument that we're all here now discussing, which is

24 whether or not the indictment has to charge a greater sum, an

25 amount exceeding $10,000 from which the defendant structured



20

1 smaller amounts. 9 : 0 2 A M

2 MR. BARRINGER: I don't believe that this is important

3 for that. I won't say that it's completely irrelevant from

4 what we're arguing, but this doesn't really address what we're

5 talking about, I agree.

6 THE COURT: Okay. Is there any argument that you wish

7 to make regarding the force and effect of the regulation or the

8 lack of force and effect of the regulation, assuming that's --

9 I believe that to be your argument?

10 MR. BARRINGER: I will go to where the Court was just

11 at with respect to this 103.11(n) is what's actually defined.

12 THE COURT: Yes.

13 MR. BARRINGER: Which is not, by the way, what was

14 charged. We were charged with 103.22 in this indictment, I

15 believe. So this definition is someplace else. I think that's

16 right. No. I'm sorry. It is 103.11.

17 THE COURT: Yes, 103.11 on page 7 of the indictment.

18 MR. BARRINGER: The cases talked about sub-part (a).

19 They talked about sub-part (gg). Does the Court get a flavor

20 of what I'm talking about in that there are all kinds of

21 different definitions all over the place with respect to this?

22 And in the Nall case, they go to 103.11(n) as to issue

23 involved.

24 THE COURT: But there is really only one definition in

25 the regulations of structuring. To structure a transaction,



21

1 there is really only one place that that's defined, is there 9 : 0 4 A M

2 not? Now -- well, let me ask you to answer that question. Do

3 you know of another specific definition of structuring other

4 than this one, not about what a transaction is but of

5 structuring?

6 MR. BARRINGER: As I stand here, I won't say that I

7 specifically do, no.

8 And as you look through this process of conduct one or

9 more transactions in currency in any amounts at one or more

10 financial institutions on one or more days in any manner for

11 purposes of evading the reporting requirements under 103.22 is

12 you have to evade the reporting requirements. Well, what is

13 the reporting requirements? Again, it's the 10,000, in any

14 manner includes but is not limited to the breaking down of a

15 single sum of currency exceeding 10,000 into smaller sums. And

16 so there you have in the beginning at least the discussion once

17 again it's got to be more than 10,000 in this regulation.

18 THE COURT: But the regulation is not that narrow.

19 That's why you can't reconcile it with Ratzlaf.

20 MR. BARRINGER: Yes, that's the point is that while

21 parts of it stayed exact same as Ratzlaf and then it turns

22 right around and says something completely different, or it

23 seems to, because it then says breaking down a single sum of

24 currency exceeding $10,000 into smaller sums, including sums at

25 or below 10,000, in the conduct of a transaction or series of



22

1 currency transactions including transactions at or below 9 : 0 5 A M

2 10,000. What does that mean? I mean, that is my point, is

3 that this doesn't seem to fit with what Ratzlaf is saying at

4 all, that structuring really is two or more transactions as

5 part of an overall structure to avoid the reporting

6 requirements.

7 THE COURT: But Ratzlaf and these other cases that

8 deal with the lump sum definition, which is the classic case of

9 structuring. I give you that. That is the classic case of

10 smurfing that I've seen reference, but the regulation is just

11 not that narrow.

12 MR. BARRINGER: Then you have to reconcile the

13 regulation with what the statute says. Can the regulation say

14 something more than what the statute says? I don't think that

15 it can.

16 THE COURT: Have you addressed that, that issue, that

17 legal question?

18 MR. BARRINGER: In an offhand way, I've commented that

19 we have to look at the statute, not the regulations. And that

20 really is, when we look at this, the government's position is

21 really hinged on a regulation versus the statute, because the

22 argument has been the regulations say we can do all these other

23 sorts of things and they quote Coney and Shirk and that was in

24 Document 181, the last response, where they work through the

25 regulations at length trying to build a case that the statute



23

1 says this. Well, we know that the statute doesn't have all 9 : 0 7 A M

2 these other words. That's what the regulations are for. But

3 can the regulation go beyond what the statute is? This

4 regulation and this definition has parts of what we're trying

5 to say, and then it goes in different directions after that by

6 using phrasings including but not limiting to. I don't believe

7 that this regulation can stand that muster. I believe the

8 statute controls. I believe Ratzlaf controls. And under that

9 scenario, each of these counts fail.

10 THE COURT: Let me ask a hypothetical: If the

11 evidence in the case -- well, assume we have the same type of

12 charge, charging in the indictment, separate counts, individual

13 transactions each under 10,000, no lump sum alleged. What if

14 the evidence in the case was that, and I'll use the defendants

15 here just for sake of making argument and this is not the

16 evidence at the trial but this hypothetical, that Mr. and Mrs.

17 Hovind, there was evidence that they had had a conversation

18 with one another, Mr. Hovind knew that Mrs. Hovind was going to

19 the bank that day, they had a conversation, they spoke about

20 their knowledge of the CTR, the reporting requirements and

21 Mr. Hovind told Mrs. Hovind, be sure don't withdraw any more

22 than 10,000, keep your withdrawals at, you know, $9,900, you

23 know, make one withdrawal today and one withdrawal tomorrow,

24 maybe next week. There is no discussion of an overall sum of

25 money. Okay.



24

1 MR. BARRINGER: I think there is still a problem with 9 : 0 9 A M

2 the indictment as it is written.

3 THE COURT: Even though the intent is clearly there?


5 THE COURT: The intent is to evade, your position --

6 MR. BARRINGER: And the reason I say that. I'm sorry.

7 THE COURT: No, no. Go ahead. I think I know your

8 position.

9 MR. BARRINGER: I think you could make an argument at

10 that point in time that there is a greater sum available

11 because you just have to get the deposits to see what's there,

12 to see what -- you could get, in fact the Kushner court talks

13 about the government being able to do the research, okay, how

14 much was really there. What was the money from, those sorts of

15 things.

16 THE COURT: We have that in this case. We have the

17 bank account with, you know, an amount that was present in the

18 bank account the day Mrs. Hovind withdraw the sum she withdrew.

19 MR. BARRINGER: The Kushner court was going in a

20 direction that the indictment has to allege the greater

21 amounts --

22 THE COURT: Right.

23 MR. BARRINGER: -- versus we know that it might be

24 there. In fact, I don't think anybody would dispute there was

25 more than $9,500 in the account at the end of one day. I'm not



25

1 sure why the government didn't try to do what we're now talking 9 : 1 0 A M

2 about in trying to figure out how much was there and saying,

3 rather than tip everybody off and take 10,001 out, they take

4 $9,500 out because they have more than enough, or whatever, but

5 they didn't do that. And because they didn't do that, and

6 we're working on the same set of allegations, not facts proved

7 at trial, but allegations in the indictment that it's just

8 $9,500, with nothing else talked about, and intents to not to

9 go over 10,000 because we know the CTR is not in and of itself

10 still the act necessary to be a crime. You might have the

11 intent but you haven't -- you might be able to allege it's an

12 attempted structure, but that wasn't really what was charged

13 either. It was structuring there.

14 THE COURT: So follow another hypothetical: If I walk

15 into a financial institution, I'm going to withdraw, stay away

16 from deposits. I'm going to withdraw an amount of money. The

17 bank teller says to me, well -- or I ask the question, you

18 know, I understand you have some reporting requirement to the

19 IRS. What is the threshold amount that will trigger that

20 reporting requirement? And the bank teller advises me that

21 it's in excess of $10,000 so I write my withdrawal ticket

22 for -- or I write out my check to cash for 9,500 because in my

23 mind, and there is evidence in my mind, I don't want to trigger

24 that reporting requirement, but I didn't have an exact number

25 in my head when I walked into the bank as to how much I was



26

1 going to withdraw. I just knew when she told me it was more 9 : 1 2 A M

2 than 10,000 that would trigger the reporting requirement, that

3 I wanted to stay under that. And that's what was alleged.

4 MR. BARRINGER: That really is cutting the hair fine

5 at that point. And a couple of issues come out at me: Number

6 One, could intent had been inferred that more than 10,000 was

7 intended on being taken out, but because of the conversations

8 with the bank, did they decide not to? Did you decide not to

9 take more than 10,000 out? Because if that's the case, then

10 you could make an allegation that they had more than 10,000,

11 but in order to avoid the reporting requirements took out 9,500

12 with the intent perhaps to take out more later. You can make

13 an allegation like that and try to prove it at trial. But to

14 simply say, you know -- strike that.

15 In going along with what you've said, that I know the

16 reporting requirements because the bank and I have had a

17 conversation. The bank said, well, if you take out $10,001,

18 I'll have to tell the IRS, and I have this form that I have to

19 fill out, and that's the way it works. And you say, okay, then

20 I'll take 9,500 out, you could arguably even then make the

21 inference from that conversation that you knew how much it was,

22 the base -- direct evidence shows that there was more than

23 10,000 in the ask, and you could build a structuring charge

24 around that. I think that's possible, but we don't have that

25 here either.



27

1 THE COURT: Is it your position then that in the 9 : 1 3 A M

2 Hovinds' case and accept for the sake of argument that we have

3 evidence that the Hovinds were aware of this reporting

4 requirement, and I think the evidence was sufficient for the

5 jury to conclude that, they are aware of the reporting

6 requirement, they want to avoid the reporting requirement, and

7 the government charged in the indictment the balance in the

8 checking account as of the date the transactions were

9 conducted, would that have been?

10 MR. BARRINGER: I think it takes a bit more than that,

11 but that's the beginning of the process of what the government

12 would have to say. They would have to say something like with

13 the purpose in violation of 5313(a) with the purpose of evading

14 reporting requirements when the defendants knew that they had

15 more than this amount of money in the bank and with the intent

16 of specifically avoiding the threshold reporting requirements

17 took out only $9,500 on this date, but all the other language

18 has to be there, too.

19 If you look at how this indictment was written, it

20 truly is barebones in terms of even getting into what the

21 statutes are, much less any facts aside from the physical act

22 of taking a $9,500 check out. It simply didn't have the facts

23 that all these case had in order to make a structuring charge.

24 And that's where the indictment really was deficient in not

25 having anything else there to support simply saying $9,500 was



28

1 taken out because the $9,500 by itself could never have given a 9 : 1 5 A M

2 charge.

3 THE COURT: Okay. Any further argument you wish to

4 make?

5 MR. BARRINGER: You saw my brief. You've seen -- I've

6 spent a lot of time working on that. I've touched on the

7 points the government has. I don't think there is anything

8 else that I specifically have to say to make my point more

9 clearer.

10 THE COURT: Thank you for answering my questions.

11 MR. BARRINGER: You're welcome, Your Honor.

12 THE COURT: Mr. Richey.

13 MR. RICHEY: Yes, Your Honor.

14 Your Honor, I don't know if it's plausible to reserve

15 any time for rebuttal or if the Court just wants me to make

16 argument.

17 THE COURT: Make argument. I will allow you all to

18 rebut, and I'll cut you off if I think you're repeating

19 yourself, but we have plenty of time. I think I reserved three

20 hours for this. And I will give Ms. Heldmyer sufficient and

21 fair time.

22 MR. RICHEY: Thank you, Your Honor.

23 A number of things have come up during this case

24 that -- but I think the important thing is to, first of all,

25 realize that the burden rests on the government completely to



29

1 prove every count and every allegation, and the burden also 9 : 1 6 A M

2 rests on the government to cite correctly and correctly charge

3 the defendants in this case. The defense has no burden to

4 correct their charge, no burden to put on any defense.

5 Now, there is a couple of very important things in

6 this case. The first of all deals with the definition,

7 obviously, of structuring. And what we have here is a couple

8 of problems. First of all, in CFR 103.22(a)(1), it says

9 that -- and this is the Davenport case actually that I'm

10 citing, at page 1172, where they cite the regulation. It says,

11 in November 1987, as today, the Secretary's regulation in

12 addition to the basic requirement that banks report any cash

13 transaction, usually a deposit, in excess of $10,000 only

14 required a bank to aggregate the cash deposits made by a person

15 during any one business day for determining whether the $10,000

16 threshold had been crossed.

17 We then look at 103.11.

18 THE COURT: I'm sorry. Give me the page number again,

19 please, Mr. Richey.

20 MR. RICHEY: Yes, that was 1172.

21 THE COURT: Okay. I'm there. Go ahead.

22 MR. RICHEY: 103.11(p), which says that the

23 transaction or transactions need not exceed the $10,000

24 reporting threshold at any single financial institution on any

25 single day in order to constitute structuring. And then we



30

1 look at 103.11(g)(g), which says, a person structures a 9 : 1 9 A M

2 transaction if that person, acting alone or in conjunction with

3 or on behalf of other persons conducts or attempts to conduct

4 one or more transactions in currency in any amount at one or

5 more financial institutions on one or more days in any manner

6 for the purpose of evading the reporting requirements under

7 Section 103.22 of this part.

8 So it refers back to 103.22. And as the regulation

9 defines 103.22, it has to be an amount greater than 10,000

10 day -- $10,000. That's the threshold amount. That's what

11 would require a reporting requirement is exceeding the

12 threshold amount of 10,000. That's why that figure is

13 important.

14 It's also important to note that this Court in its

15 jury instruction stated that 31 U.S.C. 5313(a) and its

16 regulations require a domestic financial institution or bank to

17 file a currency transaction report. So the jury instruction

18 itself raises that issue. The jury instruction itself notified

19 the jury that it's the law. It's -- as the Court stated, 31

20 U.S.C. 5313(a) and its regulations that require the filing of a

21 CTR, and that requirement can only be triggered when the

22 threshold amount is crossed.

23 We then have to go to what the Supreme Court has

24 defined as structuring. That's where Ratzlaf is correctly on

25 point because Ratzlaf looked at the identical charge, although



31

1 it's been restructured since then, it was a charge under 5324, 9 : 2 1 A M

2 what is now (a)(3). And although the government claims that

3 this is dicta, it is the second sentence in the court's

4 opinion. The very first sentence of Justice Ginsburg's

5 opinion, which was a majority opinion says: Federal law

6 requires banks and other financial institutions to report -- to

7 file reports with the Secretary of the Treasury whenever they

8 are involved in a cash transaction that exceeds $10,000, citing

9 31 U.S.C. Section 5313 and the regulation 31 CFR Section

10 103.22(a). The very second sentence says: It is illegal to

11 structure transactions, i.e., to break up a single transaction

12 above the reporting threshold into two or more separate

13 transactions for the purpose of evading a financial

14 institution's reporting requirement. The Court then cites 31

15 U.S.C. Section 5324. It then cites another provision, 5322,

16 and then it states what the issue is in the case. For the

17 government to state that the Court is merely citing dicta here,

18 I think requires the government to state what dicta means

19 because Kushner certainly cited that same provision, certainly

20 cited Ratzlaf and that identical language.

21 Now, the Court asked Mr. Barringer if there is

22 anyplace where it would challenge that there was a problem then

23 with the regulation. And actually, before I go there, I think

24 it's important to look that in Dashney, the court looked at the

25 Senate report, which the Senate gave an example of what



32

1 structuring means. And this is Dashney, at page 538, where 9 : 2 3 A M

2 they are citing the Senate Committee on the judiciary. And

3 what the Senate, the example that the Senate gave was, a person

4 who converts $18,000 in currency, cashier's check checks, by

5 purchasing two $9,00 cashier's checks at two different banks or

6 on two different days with the specific intent that the

7 participating bank or banks not be required to file CTRs for

8 those transactions, would be subject to potential civil and

9 criminal liability. Any person conducting the same

10 transactions for any other reasons would not be subject to

11 liability under the proposed amendment.

12 On page 7 of my motion to reconsideration, I

13 specifically refer to then, we have an issue here where the

14 regulations render the statute and the purpose of Congress and,

15 in fact, render 103 -- or 103.22(a)(1) superfluous and

16 meaningless.

17 And I think where we've already discussed that none of

18 the cases that we've looked at and none of the cases that have

19 been cited set out a circumstance equal to this one here that's

20 a clear pattern for this Court to follow. I think we're

21 clearly dealing with a case of first impression here.

22 And the issue that arises is: Was Ratzlaf wrong? Was

23 the Supreme Court wrong in its definition of structuring? Is

24 there any way to say in looking at all of these cases that the

25 Supreme Court was in error in its definition? And in looking



33

1 at the Senate report and in looking at the statute saying that 9 : 2 5 A M

2 you have to evade the reporting requirement, and the only way

3 to evade the reporting requirement is to somehow have a figure

4 above that threshold and then structure the transaction under

5 that threshold.

6 It's important also to note exactly what the

7 government has stated in this case. In its motion, in its

8 response to defendant Jo Hovind's motion to reconsider

9 judgement of acquittal -- I'm not sure exactly which document

10 that is. On page 3, the government says here, each act was the

11 beginning, middle, and end of the structuring act. No

12 withdrawal was dependent upon any other withdrawal to complete

13 the intended act.

14 Now, this Court referred to the check ledgers or the

15 bank amount that the bank, I think there is no dispute that

16 there was more than the $9,500 in the account or more than the

17 $9,600. But what we have here is an admission by the

18 government that no withdrawal was dependent upon any other

19 withdrawal to complete the intended act. Each act was

20 beginning, middle, and end of the structuring act. So the

21 government has never alleged, never argued at trial, and

22 presented no evidence that Count 13 had another amount

23 connected with it. The government has relied solely on those

24 sparse amounts of 9,500 or $9,600 as the complete actus reus.

25 The government cannot now claim or allege because that the



34

1 indictment did not allege or claim and as there was no 9 : 2 7 A M

2 testimony at trial and, as the government has clearly admitted,

3 that there was greater than $10,000 that was structured.

4 And looking specifically at the Phipps case, and

5 although this Court did state, and I certainly do not disagree

6 with this, that it's irrelevant if the reporting requirement

7 was in fact triggered, because that's the whole purpose of

8 structuring, is that you have an amount greater if you

9 structure in order not to trigger it, and it wasn't triggered.

10 But less we not forget, there was in fact evidence submitted at

11 trial that in fact currency transaction reports had been filed

12 on a couple of occasions and the government dismissed that as

13 just an error on the part of defendants.

14 However, even looking at Phipps at page 1058 of

15 Phipps, where they cite 31 CFR 103.22, says: Each financial

16 institution other than a casino or postal service shall file a

17 report of each deposit, withdrawal, exchange of currency or

18 other payment or transfer, by, through, or to such financial

19 institution which involves a transaction and currency of more

20 than 10,000.

21 So it's clear from all the cases and from the

22 definition as put forth in Ratzlaf that -- and by the

23 regulations, that in order to evade a reporting requirement,

24 there has to be a currency amount of greater than 10,000, that

25 the government admits that in Counts 13 through 57, each one is



35

1 independent. Each one is separate and constitutes a structure 9 : 3 0 A M

2 only with the amount alleged, 9,500 or 9,600.

3 THE COURT: Let me ask, Mr. Richey, as to the

4 language -- and I pose this question to Mr. Barringer -- as to

5 the language that was added by the Court to the structuring

6 jury instruction, would you agree that that language from the

7 regulation really is the language that addresses the sort of

8 the Cure line of cases, what we're talking about now in Phipps,

9 that it doesn't matter or is irrelevant whether that reporting

10 requirement was actually triggered by the transaction at the

11 bank? That's what that language to me refers to, which is not

12 the issue we are discussing here today.

13 MR. RICHEY: I disagree with that because I believe

14 that what it did was say that in absolutely no way did the

15 government have to prove that the amount structured exceeded

16 the $10,000 limit.

17 THE COURT: Okay. So you are taking issue then with

18 that regulation as well?

19 MR. RICHEY: Yes, Your Honor, because, as I previously

20 stated, that regulation would render superfluous, I think is

21 how it's pronounced, meaningless the actual statute and

22 102.11(a)(1), which it refers back to.

23 THE COURT: What regulation -- I'm referring -- I'm

24 referring now to -- I believe it's -- I'm trying to remember

25 what the subsection is.



36

1 MR. RICHEY: (gg). 9 : 3 2 A M

2 THE COURT: Is it (gg)?

3 MR. RICHEY: I believe so.

4 MR. BARRINGER: If I might, Your Honor, I think it was

5 (p) that you and I were talking about 103.11(p).

6 THE COURT: Okay. So look at 103.11(p).

7 MR. RICHEY: Okay. So (p) says, the transaction or

8 transactions need not exceed the 10,000 reporting threshold at

9 any single financial institution on any single day in order to

10 constitute structuring.

11 THE COURT: Just a moment.

12 Thank you, Mr. Barringer.

13 That is the language that the Court inserted, the only

14 language that the Court inserted into the jury instruction when

15 it modified the instruction following your closing arguments.

16 The Court's understanding of that language is that it

17 serves to explain or to clarify what the Phipps court says as

18 far as a 5324 prosecution, and that is that it doesn't matter

19 whether the reporting -- excuse me -- the reporting requirement

20 was triggered based on the transaction at the bank. Again, it

21 was intended -- that language was intended to codify the

22 Tobon-Builes, I believe is the name of the case, T-o-b-o-n,

23 B-u-i-l-e-s, case from this circuit and then negate the effect

24 of those other cases like Cure and Anzalone -- and Varbel. Do

25 you not agree with that?



37

1 MR. RICHEY: Let me phrase it this way: I do not 9 : 3 3 A M

2 agree because, first of all, the Court instructed the jury that

3 31 U.S.C. 5313(a) and the regulations required a bank or

4 financial institution to file a CTR.

5 THE COURT: Excuse me. Mr. Richey, they are required

6 to file a CTR. That's the law. There is no issue about that.

7 MR. RICHEY: So then for the Court to add the language

8 specifically to say it was irrelevant whether a CTR was filed,

9 I think cuts against that.

10 THE COURT: I didn't say it was irrelevant. What I

11 said -- what that language there says, the regulation says,

12 refers to the amount of the transaction. At no time did I

13 instruct the jury that it was irrelevant whether the reporting

14 requirement was triggered, but that is the law. I don't recall

15 there being any objection from the defense as to that language

16 in the jury instruction in any event, the language as far as

17 the bank having to file the report.

18 MR. RICHEY: But my issue is then that what that told

19 the jury was that there didn't need to be, although a single

20 transaction, and certainly in structuring cases, the

21 transaction does -- is below a $10,000 -- it is below the

22 threshold amount. That's the whole reason for the statute is

23 because these amounts were structured under the threshold

24 amount to avoid or to evade, excuse me, the reporting

25 requirement.



38

1 THE COURT: All right. But under the statute before, 9 : 3 5 A M

2 5324 was enacted, that would not have been enough.

3 MR. RICHEY: 5324 was enacted. Ratzlaf specifically

4 looked at 5324.

5 THE COURT: Again, I'm referring back to Phipps and a

6 prosecution for causing the bank to fail to file the report.

7 MR. RICHEY: I understand.

8 THE COURT: That's what prompted that regulation that

9 we've just referred to in subsection (p) to be created.

10 MR. RICHEY: But we would note -- I would note, Your

11 Honor --

12 THE COURT: And 5324 be passed. I'm sorry.

13 MR. RICHEY: I would note that it's not Congress that

14 changed this. It's a regulation.

15 THE COURT: I understand that, but it explains

16 congressional intent. It is something the Court can look to as

17 far as how the statute should be interpreted or could be

18 interpreted.

19 MR. RICHEY: Yes, and I don't dispute that. And it

20 is, I believe, Your Honor, correct in the fact that a

21 structured transaction would not exceed the $10,000 reporting

22 requirement, but I think at that point, it was then misleading

23 to the jury because you still had to have an amount that was

24 structured that exceeded 10,000, certainly the transaction

25 itself. And I think maybe one of the problems is we're



39

1 combining structure and transaction and trying to make them 9 : 3 7 A M

2 equivalent in the same definition.

3 THE COURT: I also think that the problem is that the

4 Eleventh Circuit pattern instruction is where we started with

5 our instruction to the jury is a restatement in part, only in

6 part, of the regulation and a restatement of the Ratzlaf

7 definition, which is not the entire regulation definition

8 that's given there. And you and Mr. Barringer disagree with

9 that regulation and believe that it does not state

10 congressional intent and that's -- that's the issue here.

11 MR. RICHEY: I think the issue is that it, although

12 the transaction itself would not exceed, and I think that's a

13 correct statement, it would not exceed the $10,000 threshold,

14 reporting threshold.

15 THE COURT: It does not have to.

16 MR. RICHEY: Correct. The total amount structured has

17 to exceed that.

18 THE COURT: Right. And that -- again, this is where

19 you and Mr. Barringer, I believe, have your argument, or the

20 center of your argument is that the jury instruction didn't

21 state that. I mean, there was no instruction to the jury as

22 far as this greater sum and that's -- the pattern instruction

23 doesn't refer to it. We never discussed during this trial

24 Ratzlaf. I mean, there was never an argument made to the Court

25 about Ratzlaf and the Ratzlaf definition. The only -- I don't



40

1 want to say we never discussed Ratzlaf because I think we did 9 : 3 9 A M

2 in the context of the willfulness element, but not in the

3 context of the structuring definition, so. . .

4 MR. RICHEY: I agree. And oftentimes I'm not as clear

5 as I should be and maybe that was one of the issues in my

6 closing argument, because certainly my intent was not that

7 there had to be a CTR filed. That was not my argument. My

8 argument was there had to be an amount that would have

9 triggered this CTR, and the amount had to be structured under

10 that in order to do it. And so from my view, the inclusion of

11 that word in the jury instruction then went specifically to

12 impair the effectiveness of my argument or in fact repudiate

13 it, and I think that was the whole intent of the inclusion of

14 that, at least that was my perception, that it went to

15 repudiate or impair the effectiveness of my argument, that that

16 threshold amount had to be crossed. In order to be

17 structuring, there had to be more than 10,000.

18 THE COURT: But your argument to the jury was that the

19 transaction, there had to be evidence that the transaction

20 exceeded $10,000.

21 MR. RICHEY: The structured amount.

22 THE COURT: That's not the argument that you were

23 making. What you were making was -- your argument was that the

24 transaction had to exceed 10,000, and that's why this language

25 was added, because the transaction itself does not have to



41

1 exceed 10,000. 9 : 4 0 A M

2 MR. RICHEY: Well, and I think also, Your Honor, in

3 looking at all these cases, the cases themselves are not that

4 careful in their precise wording. They say structured

5 transaction. They say structure. They say transaction. And

6 it's used interchangeably. However, one of the things that has

7 to be noted is that a structured transaction.

8 THE COURT: But I understand your argument today,

9 Mr. Richey, but this is not the argument that you were making

10 to the jury during your closing. And it really wasn't an

11 argument that you made as artfully to the Court at the time of

12 trial as you and Mr. Barringer make today.

13 MR. RICHEY: I agree with that.

14 THE COURT: And the reason, again, this language was

15 added was because the argument to the jury that the

16 transactions had to exceed $10,000 is an incorrect statement of

17 the law.

18 MR. RICHEY: I believe -- and again, you know, I just

19 want to make a point and move on because I don't want to argue

20 with the Court, but I believe that my argument was that the

21 government had to prove that there was an amount that exceeded

22 the transaction amount that was structured, that that had to

23 have been what the government had to prove and that there was

24 insufficient evidence.

25 Being that then -- I mean, we've discussed primarily



42

1 the actus reus, but the Court also asked us to discuss the mens 9 : 4 2 A M

2 rea, and the mens rea requires that there be the knowledge of

3 the reporting requirement, and there was no evidence whatsoever

4 that the defendant's had knowledge of the reporting

5 requirement.

6 Now, let me cite page -- on page 4 and 5 of the

7 government's brief, Document 181, their supplemental brief,

8 beginning at the bottom of page 4. The government states this:

9 A person engages in structuring not only where he or she

10 engages in multiple transactions but also where the person,

11 after being informed that the institution intends to file a

12 report on the transaction, seeks to take back part of the

13 currency in order to reduce the amount of the transactions to

14 10,000 or less. This is the government's own brief citing to

15 the amendments of the Bank Secrecy Act Regulations. So what

16 the government says is, and again, a direct quote: A person

17 engages in structuring not only where he or she engages in

18 multiple transactions but also when, after the person has been

19 informed that a CTR is going to be filed, they take some of it

20 back.

21 Now, if the government is now admitting that, which

22 they clearly do, again, Counts 13 through 57 are deficient.

23 THE COURT: I don't understand your point. What point

24 are you making?

25 MR. RICHEY: Well, the government has admitted on page



43

1 4 through 5 of Document 181, again that a person engages in 9 : 4 4 A M

2 structuring not only when there is multiple transactions, which

3 are not the charges here --

4 THE COURT: Right.

5 MR. RICHEY: -- but also then when the person, after

6 being informed that the institution is going to file a CTR,

7 takes back part of the money to reduce the amount to a

8 transaction to $10,000 or less. So that shows clear intent.

9 And in looking --

10 THE COURT: Okay. But I still don't understand the

11 point you're making. That's the government's -- an argument

12 that they made in their brief to the Court, and it's very

13 similar to the hypothetical that I posed to Mr. Barringer just

14 a moment ago, and it also is consistent, arguably so, with the

15 regulation because the regulation does refer to one or more

16 transactions. So your point from -- and obviously, the

17 government's prosecution -- I mean, they are relying, at least

18 in part, if not in large part, on the language in this

19 regulation. But what is your point here, that you disagree

20 with that?

21 MR. RICHEY: No. My point is that the government

22 admits that there had to be multiple transactions to exceed the

23 $10,000 amount. But also then going to the mens rea, that

24 there had to have been some way, some proof, some evidence that

25 the defendants were made aware that exceeding $10,000 would



44

1 trigger the reporting requirement and they had to then have 9 : 4 6 A M

2 that knowledge or that understanding.

3 The Cassano case, at page 16, specifically says that

4 the defendant must have knowledge of the reporting requirement.

5 There was insufficient evidence of that here at the trial.

6 There was no evidence, whatsoever, that the defendants were

7 told when they went in to withdraw from the bank that, well,

8 you know, this could be structuring, if you went to 10,000 or

9 more, the bank would be required to file a CTR. In one of the

10 cases, the defendant had in his hand the instructions. In

11 another case, the defendant told his employees not to

12 withdraw -- or not to deposit more than $10,000 because that

13 would trigger the reporting requirement. I believe that that

14 was the Coney case.

15 THE COURT: But here in this case we have evidence,

16 and the Court has already ruled that there was sufficient

17 circumstantial evidence from which a jury could have concluded

18 or found that the defendants had the knowledge based in part on

19 the communication from Glen Stoll to them, about the $10,000

20 transaction.

21 MR. RICHEY: And that's very important because that

22 communication from Glen Stoll came after -- the time frame

23 after Count 57. So all of the acts, 13 through 57, had been

24 completed by the time of that memo from Glen Stoll. So if the

25 Court relies solely on that, there is no evidence then at the



45

1 time of the transactions that they had actual knowledge. 9 : 4 7 A M

2 I don't know that I have much more, and I don't want

3 to belabor the issue.

4 THE COURT: I'll hear from Ms. Heldmyer now. It's her

5 turn. And then I'll give each of you an opportunity to rebut.

6 MS. HELDMYER: Good morning, Your Honor.

7 THE COURT: Good morning.

8 MS. HELDMYER: Your Honor, this case seems to be

9 boiling down to a fundamental disagreement as to what the

10 regulations and the statutes say. The defendants are clearly

11 arguing that the issue is that the indictment must charge and

12 one must commit structuring by withdrawing over $10,000 or

13 having over $10,000 charged even if it's a fluid account in a

14 use cases versus a lump sum case and a source case. We, of

15 course, disagree with that for a number of reasons, many of

16 which were spelled out in our brief.

17 The regulations are -- the law on the regulations are

18 obviously where we start in any analysis of what it takes to

19 commit a crime in this case, and in any case. In this

20 particular case, it's a little unusual because the legislature

21 and the regulations, which were promulgated as well, obviously

22 create a number of situations that can define structuring that

23 can be within the definition of structuring, and we have talked

24 about the law. The Court is well aware of the law. The

25 definitions are all spelled out, including the definition of



46

1 transaction, which I believe Mr. Barringer argued was not 9 : 4 9 A M

2 clearly defined, but in fact, it is in subsection (i)(i) of

3 103.11, where it clearly includes as a transaction a single

4 withdrawal. So that issue is cleared up.

5 The argument that the government has made in its brief

6 and continues to make is that the law on the regulations are

7 abundantly clear and unambiguous, and that any disagreement can

8 be remedied simply by reading the law on the regulations.

9 The regulation that defines structuring under (gg),

10 which we have consistently argued, has an enormous range of

11 activities that can fall within the definition of structuring.

12 Acting alone or in conjunction with or on behalf of other

13 persons, a defendant conducts, attempts to conduct, or assists

14 in conducting one or more transactions in currency in any

15 amount, clearly in any amount -- there are no caveats to

16 that -- at one or more financial institutions on one or more

17 days in any manner. In any manner has also been further

18 defined to be breaking down a single sum of currency or having

19 a single transaction, that single transaction need not exceed

20 the $10,000 reporting threshold at any single financial

21 institution. There is very little that is not included as long

22 as it is accompanied by the requisite mens rea, as we, the

23 Court has already found we proved in this case.

24 Clearly what Congress has been trying to do with the

25 past couple of amendments of this statute is to ensure that



47

1 they have covered all the possible ways the defendants have 9 : 5 1 A M

2 come up with over the years to structure transactions to avoid

3 reporting requirements. There are as many ways to do that as

4 there are defendants, potential defendants, who want to avoid

5 and evade the reporting requirements. So clearly, what

6 Congress' intent and the Department of Treasury's intent has

7 been to be all inclusive to anything that a person can do with

8 currency in order to evade structuring. That is clear from the

9 legislative history as well as the plain unambiguous language

10 of the regulations and the law.

11 We have cited to the Court a number of quotations from

12 the legislative history, including the one just discussed with

13 Mr. Richey, which is the hypothetical, which was a hypothetical

14 that was provided in the legislative history.

15 THE COURT: The legislative history, are you referring

16 to the history of the regulation or the statute?

17 MS. HELDMYER: Your Honor, the hypothetical --

18 THE COURT: Are you referring to the hypothetical

19 about the individual going into the bank and being told by the

20 teller that the reporting requirement would be met by a

21 transaction in excess of 10,000 or. . .

22 MS. HELDMYER: Yes, Your Honor, that's the regulation.

23 That's the Department of Treasury regulation, the final rule

24 from the regulation. That is a hypothetical example of that --

25 that contradicts all of the arguments that Mr. Barringer just



48

1 made with regard to what was required in order to have 9 : 5 2 A M

2 structuring. It is one of many hypotheticals that were

3 provided but not ever intended to be an exhaustive list. It

4 can't be because there are too many ways that people can come

5 up with to violate the statute. So as long as you take some

6 activity with currency and you combine it with the mens rea and

7 I know I'm being very, very broad here, but the statute is

8 very, very broad, and so are the regulations, as long as you

9 combine it with that intent, the requisite intent, then you

10 have a structuring violation.

11 THE COURT: How are they different? I mean, under the

12 government's position, how is the actus reus and the mens rea

13 different? I mean, aren't they really one in the same? I

14 mean, you infer the intent from the act of structuring and --

15 MS. HELDMYER: You certainly do in some cases, Your

16 Honor.

17 THE COURT: But in this case? Let's talk about this

18 case.

19 MS. HELDMYER: In this case we have both. In this

20 case we were able to prove direct knowledge as well as

21 circumstantial evidence of knowledge based upon the activities

22 of the defendant. Clearly in the case of Jo Hovind, we showed

23 that primarily by the circumstantial evidence, the evidence

24 that she went irregularly into the bank and conducted these

25 financial transactions regardless of the fact that she had more



49

1 money to get out of the bank and regardless of the fact that 9 : 5 4 A M

2 she needed more money at any particular point in time.

3 We also had some evidence other than just the fact

4 that they were -- the acts that she was conducting. We have

5 the AmSouth teller that testified that customers are regularly

6 notified about the reporting requirements or when a report is

7 going to be filed and that there are signs up all over the bank

8 and particularly the branch that Mrs. Hovind went to to conduct

9 these acts, have signs up talking about the $10,000 requirement

10 and the report, the 2 o'clock -- I'm missing the word here --

11 the 2 o'clock cutoff, I suppose, for the transaction before 2

12 o'clock and the transactions after 2 o'clock, which, of course,

13 led to a couple of the -- the reports actually being filed in

14 this particular case. So we had a little more, even in her

15 case. But in Mr. Hovind's case, we had direct evidence. We

16 also had the conversation that Brian Popp testified about where

17 he had a direct conversation about reporting requirements, the

18 $10,000 limit, and Brian Popp testified directly that

19 Mr. Hovind thought that those reporting requirements were,

20 quote, a bad thing. So we had direct evidence with regard to

21 that, and I'm not sure that Mr. Richey is correct about the

22 date, the timing of the communication with Glen Stoll. I would

23 have to go back and check on that, but my memory is that those

24 were documents that were in the possession of Mr. and Mrs.

25 Hovind at the business during the time of the structuring. I



50

1 could be wrong on that, but I did not check that prior to 9 : 5 5 A M

2 coming in here, but I believe that may have been available.

3 But even if that's not the case, Your Honor, we had plenty of

4 evidence, independent of the actus reus in this particular

5 case, that the defendants had the requisite mens rea as well.

6 THE COURT: I'm sorry. I've got to stop you here

7 again so I don't forget.

8 MS. HELDMYER: Sure.

9 THE COURT: The knowledge element, okay, I'm on board

10 with you there as far as the evidence, but in terms of the

11 intent to evade, not just knowledge of the reporting

12 requirements, but then the intent to evade those reporting

13 requirements, the evidence -- the evidence in support of the

14 intent element for each of the defendants is, what, from the

15 irregularities, from the pattern? Is that the activities of

16 Mrs. Hovind? Is that what the government is suggesting as far

17 as the evidence of the intent?

18 MS. HELDMYER: Your Honor, I would certainly agree

19 with the Court that that was the vast majority of the evidence

20 presented. I believe that the jury could have also, for intent

21 purposes, also used the other evidence in conjunction with the

22 pattern, but I certainly agree that that was the bulk of the

23 evidence from which the jury can conclude intent in this case,

24 given -- in terms of the pattern including the fact, and here's

25 another point that I disagree with Mr. Barringer with regard to



51

1 the $10,000, I do not agree that we have to prove 10,000. The 9 : 5 7 A M

2 case law is very clear as well as the regulation, but in fact,

3 we did because each and every time, as the Court pointed out,

4 each and every time she went in there, she had more than

5 $10,000 available to her. And we showed by the records --

6 remember all of the records that came in with regard to what

7 their labor cost obligations were, the salaries, the wages that

8 they were paying out, were substantially more than the 95- or

9 $9,600 that she was getting out each and every time. So what

10 we were able to prove is not only that she had available to her

11 more than $10,000, we also proved that she needed more than

12 $10,000 for the purpose for which she was using the money. So

13 we were able to prove on two different occasions that there was

14 an amount over $10,000 that was important in this particular

15 case and that she purposely did not get out as much money as

16 she needed every time that she went, in fact leading her to go

17 several times a week sometimes to the bank and even several

18 times a day or at least more than once a day on a number of

19 occasions to get out more money, each time less than that

20 $10,000 amount.

21 Did I answer the Court's question?

22 THE COURT: Well, my -- yes, yes, and then some.

23 The question that I had really has to do with whether

24 each individual count in the indictment can stand on its own --

25 MS. HELDMYER: Yes, Your Honor.



52

1 THE COURT: -- in terms of the elements of the 9 : 5 9 A M

2 offense.

3 MS. HELDMYER: Yes.

4 THE COURT: And I guess I wanted to ask whether the

5 government was relying on, say, Counts 14 through 57 to prove

6 Count 13, and that's where I was headed with my question.

7 MS. HELDMYER: All right. And that's certainly a

8 valid question, particularly in the multiplicity argument, but

9 clearly our position, and I don't want to waive the position,

10 is that that argument was waived and that's not a valid

11 consideration for the Court procedurally at this point in time.

12 However, we are certainly prepared to address it substantively.

13 The way that this indictment was charged is based

14 primarily on the fact that it's a use case. Use cases are a

15 little bit more difficult to deal with in terms of writing an

16 indictment than source cases. There is no question, and I

17 absolutely agree with the line of cases where -- that indicated

18 that in a source case when you start with one lump sum of

19 money, that that lump sum of money, once you get that and then

20 you go about structuring it so that none of the transactions

21 are over $10,000, that that is one count, because in order for

22 you to complete the transaction, to complete the structuring,

23 all of that money needs to be disposed of. So that is one unit

24 of prosecution and that is one count. I absolutely agree with

25 that.



53

1 In this particular case, which is in line with the1 0 : 0 0 A M

2 facts of Coney and that's why Coney, even though it is a

3 District Court case unreported, it is crucial in evaluating the

4 sufficiency of the indictment in this case and the way that

5 this case was charged. What they say and what we have argued

6 all along is that there is no way to do that in a use case.

7 You do not have a lump sum of money that you start with. You

8 have each individual act, each time she went to the bank. Each

9 time money was withdrawn from the bank, it was withdrawn from a

10 different pot of money, a very fluid pot of money. The source

11 of that money could have been -- was different every time she

12 went to the bank. So there was no lump sum of money even in

13 the bank because it wasn't a deposited one lump sum of $10,000

14 or $100,000 that was withdrawn over time. This is a fluid bank

15 account, a business bank account, into which their money was

16 flowing, wherever it came from, where they were making regular

17 deposits, as the bank accounts show, and they were making

18 regular withdrawals from this and for other things. They were

19 writing numerous checks on this account. So every time she

20 would go into the bank, she was withdrawing from a different

21 pot of money, from a different source of income. So there was

22 no way to group that amount of money. There is no way to group

23 it in terms of days because she would go in irregularly. So it

24 wasn't as if she had a pattern where she would go in every

25 Monday, Wednesday, and Friday where those Mondays, Wednesdays



54

1 and Fridays could be grouped, even though the case law1 0 : 0 2 A M

2 indicates that that would even be an artificial way to break up

3 these transactions.

4 So in other words, if you look at this case in the big

5 picture and you eliminate the fact that there's already been an

6 indictment and you look at it and you try and figure out a way

7 to break this up into increments that could be charged, there

8 is no other way to do this because they are all irregular.

9 They all stand on their own. They are all complete units of

10 prosecution, just like the Court indicated in Coney. The Court

11 in Coney specifically acknowledged the fact that use cases are

12 significantly different than source cases, and they have to be

13 treated as such in terms of determining what the unit of

14 prosecution is.

15 THE COURT: Do you know of another use case other than

16 Coney?

17 MS. HELDMYER: I don't, Your Honor. And this is

18 unusual. And frankly, to be honest with you, I've researched

19 it fairly thoroughly before presenting this indictment to the

20 grand jury to determine whether or not this was appropriately

21 charged. There just wasn't a whole lot of help out there with

22 use cases. So you go with what you feel is an appropriate unit

23 of prosecution. The only alternative in this particular case

24 would have been to charge one count flowing over the whole

25 period of two-and-a-half, three years, whatever it was in this



55

1 particular case. 1 0 : 0 3 A M

2 But that, I believe, you could make a very valid

3 argument would be duplicitous, so -- because that is charging a

4 number of counts into one count. Now, normally we don't get

5 duplicity arguments because no defendant wants to argue that

6 they should have been charged with 45 counts instead of one.

7 But I believe that to charge it any other way would have been

8 duplicitous because otherwise it would have been random. If I

9 would have charged one count per week, that would have been

10 random. There would have been that there would be no other

11 rhyme or reason to that. There was no other way to break it

12 down except to to do either 45 counts, however many there were,

13 or one count.

14 So the Court may decide that multiplicity is an issue

15 in this case. I do not believe that it is. But if the Court

16 decides that, the net effect, even if the Court feels that

17 argument wasn't waived, the net effect is the same, one count

18 or the counts as charged. The Court can, and we would

19 certainly urge the Court, to sentence Mrs. and Mr. Hovind

20 exactly the same as if they had been charged with multiple

21 counts because the sentencing guidelines are designed to

22 account for those types of groupings, and they were grouped.

23 THE COURT: But if Mr. Mr. Barringer's position is

24 correct, that all of the counts must fail because there is no

25 sum greater than 10,000 alleged in the indictment, then I don't



56

1 think that the convictions can be modified or the sentence can1 0 : 0 5 A M

2 be modified in this case, and the defendants' argument in my

3 mind is not a multiplicity argument, although the line of

4 cases, the Davenport line of cases were dealing with just that

5 issue, but I really don't -- and they can correct me when they

6 get back up. I don't interpret their argument as being a

7 multiplicity argument. They find support for their overall

8 argument in that Davenport line of cases, the reasoning in

9 those cases, but my understanding really is more of the

10 indictment, these counts in the indictment, 13 through 57,

11 simply, each one failings to state a claim.

12 MS. HELDMYER: I understand that is their argument,

13 Your Honor, and I want to address that directly. Certainly,

14 Your Honor, the reason why we included the multiplicity

15 language is because we believe that that is in fact what they

16 are truly arguing, what they are really saying in this. They

17 are making the same analogy, but they are making a wrong

18 conclusion in terms of the relief that they are entitled to.

19 We believe what they are truly arguing is -- and shown by the

20 cases that they cite, which are multiplicity cases. I mean,

21 that's what Davenport was.

22 THE COURT: But all of those cases, and I think

23 Mr. Barringer mentioned this in his argument, all of those

24 cases, even Shirk, according to Mr. Barringer, have that

25 overall larger sum of money or source that we don't have



57

1 present in this case.1 0 : 0 6 A M

2 MS. HELDMYER: Well, I disagree with that, Your Honor.

3 First of all, I don't think that's what Shirk says. I think

4 Shirk is very clear. They are making the same argument, the

5 defense was making the same argument in Shirk that the defense

6 is making here, and that argument failed. And that is, that

7 the government failed to charge an identifiable pool of money

8 over $10,000, which was broken down into smaller components.

9 That's exactly what the Shirk defendant argued, and that's

10 exactly what was rejected by the court. And that's the

11 argument they are making here, which just simply isn't true.

12 Certainly, Your Honor, I agree that Mr. Barringer is

13 correct that we have to charge over $10,000. I agree with the

14 Court that that can't be remedied in terms of the structuring

15 count, but that is clearly not the law. That's not the law in

16 Shirk and it's certainly not the law or Nall.

17 Even if it were, Your Honor, we do have that here. I

18 disagree with him there too. We do have a larger pool of money

19 two times. We have the larger pool of money sitting in the

20 bank, which she did not withdraw, and we have the larger amount

21 of money that she needed that she didn't withdraw. We proved

22 both of those things. So I do think we do have those in this

23 case, not alleged in the indictment certainly, but we do have

24 that in this case.

25 If we had shown, for example, that every time she went



58

1 in to get $9,600, she had $9,601 in the bank, then I don't know1 0 : 0 8 A M

2 that we would have a crime, but that's not what we have here.

3 We have proven that there was over $10,000 available, that

4 there was an over $10,000 need, and that the decision was made

5 to withdraw $9,500.

6 And I also very strongly disagree with the argument

7 that the defense has made that this is inconsistent with

8 Ratzlaf. Ratzlaf is certainly not inconsistent with the

9 analogy that we are making here, and it is certainly not

10 inconsistent with the state of the indictment and the state of

11 the proof that we showed in this case. In fact, first of all,

12 Ratzlaf was a willfulness. We all know this. Ratzlaf was a

13 willfulness case. That's why we say the rest was dicta because

14 the issue under review in Ratzlaf was the willfulness argument,

15 period. And that is what they addressed. The fact in Ratzlaf

16 they had a source case and they provided a single definition of

17 structuring does not exclude any other definition of

18 structuring. In fact, the Ratzlaf court cited with authority

19 the very regulations that we are citing. They just cited their

20 own portions of the regulations, those that were relevant to

21 them. And they wouldn't have done that were they going to

22 disagree with or overrule those regulations.

23 And certainly -- and this is obviously not part of the

24 case, but I'm certainly not the only one to conclude that they

25 only cited the relevant portion, that the portion that was



59

1 relevant to them of the structuring law, because if you read1 0 : 0 9 A M

2 the syllabus, the syllabus of this case as it's written, the

3 first words that are written were before the section describing

4 the state of the law in terms of structuring is as here

5 relevant. So clearly the person who would write the syllabus

6 for this case agrees with our position that they were only

7 citing the pertinent portion of the structuring statute and the

8 structuring regulation.

9 THE COURT: What force does this Court give to the

10 regulations?

11 MS. HELDMYER: Well, the regulations, Your Honor, have

12 been used by every case, every court that has ever considered

13 any portion of the structuring law. Those regulations have

14 been given full force and effect. They have been given full

15 authority by every court that's ever considered structuring.

16 There's not been a court, there's not been a case cited by the

17 defendant that these regulations have been repudiated by

18 Congress, that these regulations have been repudiated by any

19 court. In fact, they are part of the definition of the

20 structuring as -- and very helpful to the Court in determining

21 whether -- how to define structuring. So, Your Honor, they are

22 certainly guidelines, at the very least, that the Court can use

23 in determining the definitions that are involved in this case,

24 as every other court has considered. And even subsequent case

25 law that has cited Ratzlaf and cited the regulations, nobody



60

1 has ever said that Ratzlaf limited to one single definition1 0 : 1 1 A M

2 what structuring is. So clearly Ratzlaf is not inconsistent

3 with any of the arguments that the Court -- that the government

4 is making here or any of the arguments that courts have made

5 subsequent to Ratzlaf. Ratzlaf has been in existence for 12

6 years now, and no one has ever come up with an argument, that I

7 can see, that Ratzlaf has narrowed the definition of

8 structuring.

9 THE COURT: Can you address, Ms. Heldmyer,

10 Mr. Richey's statement, argument, that the only way to have

11 intent or prove intent to evade is to have evidence of the

12 transaction above the reporting requirement at the outset? He

13 linked some of the regulations together in making that

14 argument, and I think he also alluded to this in his reference

15 to the jury instructions and how the Court instructed the jury

16 that the law does require the CTR to be filed.

17 MS. HELDMYER: Your Honor, I certainly can. I would

18 start that discussion by saying that it's a moot point in this

19 particular case because we did prove, as I had stated, that we

20 did involve more than $10,000 in this case, both availability

21 and need of the $10,000. So that was proved. And I might add

22 in terms of the indictment, that whether or not the $10,000 was

23 alleged is irrelevant, because clearly the indictment as long

24 as it states a cause of action is going to be sufficient. The

25 Court can -- even if the Court finds that -- and we don't even



61

1 agree with this, but even if the Court finds that there was1 0 : 1 3 A M

2 some requirement to charge some amount over $10,000 within the

3 body of the language of the charge, of the crimes charged in

4 the indictment, we can see that it is certainly -- would be

5 certainly plain error, at the very worst, with regard to any

6 such defect in the indictment. I would cite the Court to the

7 Neder case, Neder versus United States, which is a Supreme

8 Court case on materiality, 527 U.S. 1, 1999. And the Neder

9 case found that the jury instructions, the indictment charged

10 materiality, but the jury instructions did not include an

11 instruction on materiality. They found that to be plain error.

12 And then subsequent to that in the Eleventh Circuit,

13 the Sanchez, United States versus Sanchez, 269 F. 3d 1250.

14 That's an Eleventh Circuit 2001 case, which cited Neder and

15 used that for the proposition that even an element of the

16 offense does not have to be alleged -- well, it would be

17 harmless error if the indictment did not allege an element of

18 the offense.

19 So we would first argue that -- certainly the

20 indictment is not error because it is in keeping with the plain

21 language of the regulations and the statute that we do not have

22 to show or prove that the $10,000 amount alleged in the

23 indictment, but even if that were a requirement, that it would

24 be harmless error in this case, particularly in light of the

25 fact that during the course of the trial, we did in fact prove



62

1 that there was over $10,000 involved in each and every one of1 0 : 1 5 A M

2 these transactions.

3 And again, as a unit of prosecution, each time she

4 went to the bank, we were able to show that there was $10,000

5 in the bank at least available to her and that her need was

6 greater than the amount of money, greater than the $10,000

7 limit as well.

8 THE COURT: I don't believe the Court has heard that

9 argument before. Now, am I right? I mean, is this the first

10 time this has been presented to the Court? And in fairness to

11 you, we haven't discussed unit of prosecution up to this point.

12 MS. HELDMYER: Right, Your Honor. That was in their

13 memo of January 26th, I believe was the first time -- was the

14 first time that they argued the unit of the crime and the unit

15 of prosecution from the Davenport case. So that's why it has

16 not been argued up to this point. We did argue, however, and

17 certainly we even argued to the jury that each one of these

18 offenses, each one of these charges, was an independent crime,

19 standalone crime.

20 THE COURT: Sure. But in terms of whether there was

21 proof of cash, a sum of cash in excess of the 10,000, I don't

22 think I've heard the argument as far as the bank account and

23 then also in terms of the money that may have been needed to

24 pay the employees.

25 MS. HELDMYER: I agree, Your Honor. And that's in



63

1 direct response to their argument of the unit of prosecution1 0 : 1 7 A M

2 and our interpretation of the materiality question -- I mean,

3 the multiplicity question, that we believe has now been raised.

4 THE COURT: That this is a use prosecution and not a

5 source prosecution?

6 MS. HELDMYER: Exactly, Your Honor. Exactly.

7 So in terms of whether that has to be proved, I think

8 it's moot because I believe we have, and certainly in this

9 particular case the evidence was quite clear. The bank records

10 are in. The labor, all the labor charts and the labor needs,

11 all the records that were seized from CSE are in evidence and

12 anyone can look at them and see what the actual labor needs

13 were of this company. So that evidence is in, and this is not

14 something that I am presenting for the first time, certainly to

15 the Court. The argument, yes, but the evidence is in evidence.

16 THE COURT: The records that you're referring to in

17 evidence, do they correlated? I believe they do, but my

18 recollection of the evidence is rather dim at this point. Do

19 they correlated to the dates of withdrawal?

20 MS. HELDMYER: They cover the same time frame, Your

21 Honor. I'm sure not exact, but the same time frame. But we do

22 cover the time period that was charged. The records that were

23 seized were certainly. . .

24 THE COURT: Let me ask it this way: I understand this

25 is the government's theory, that Mrs. Hovind was taking out



64

1 these withdrawals, these cash withdrawals, to satisfy payroll1 0 : 1 8 A M

2 needs.

3 MS. HELDMYER: Well, there was evidence to that effect

4 as well, Your Honor.

5 THE COURT: Help me with that. Where?

6 MS. HELDMYER: The employees testified regarding --

7 Brian Popp and several other employees testified about the

8 need -- I think Brian Popp was probably the most specific about

9 it when he said that he had the conversations with Mr. Hovind

10 about paying cash to the employees. Mrs. Hovind would go to

11 the bank to get the cash. We even had some memos that came

12 into evidence about -- there was one in particular that I

13 recall where Mr. Hovind is talking about how they are going to

14 stop actually because it was too much cash for her to be going

15 to the bank to fulfill all of their wage and salary needs. So

16 there were several witnesses who testified to that effect.

17 There were memos as well. And Brian Popp specifically

18 testified about the cash that was obtained by Mrs. Hovind and

19 brought back and paid out to the employees. And we had many of

20 the checks -- the other use of that same account, we introduced

21 checks to the Court to show that other expenses, other needs of

22 the ministry were being paid by check as well. So by process

23 of elimination, you can see that the cash was primarily used if

24 not exclusively used for labor.

25 THE COURT: Okay. Anything else you'd like to add to



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1 the argument?1 0 : 2 0 A M

2 MS. HELDMYER: Just, Your Honor, if -- with regard

3 again to Mr. Barringer's argument about the indictment and the

4 indictment not being, not being sufficient, we would submit to

5 the Court that that is a bill of particular's issue and not a

6 sufficiency argument, and it goes also to the sandbagging issue

7 as well. If there were problems with the indictment, certainly

8 those are things that could have been raised prior. And some

9 of these arguments obviously were, but, as we have all

10 acknowledged, this has been an argument that has evolved over

11 time. But that is, to be perfectly honest, that is not the

12 government's problem. It's the defendants' problem to raise

13 all the issues pretrial and it's required to be raised

14 pretrial, and if they failed to raise something, that could

15 have a true problem -- we don't believe it was -- but a true

16 problem that could have been corrected by a superseding

17 indictment. That's exactly what Rule 12(b) contemplates.

18 THE COURT: I went back through the motions to

19 dismiss, the initial ones, or I guess there was a motion to

20 reconsider, but the initial motion that was filed. And

21 although the word -- again, I don't think they are making a

22 multiplicity argument, but that word certainly was not used,

23 hasn't been used at any time in this case up until the day the

24 Davenport case was referenced and provided, offered to the

25 Court for consideration. But I did -- I did review



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1 Mrs. Hovind's motion to dismiss. Let me see if I can. . .1 0 : 2 2 A M

2 MS. HELDMYER: Document 847.

3 THE COURT: Yeah. There were arguments made by both

4 defendants in the -- several in the motion to dismiss, which I

5 will refer to as typical antitax, or tax protester arguments.

6 There were numerous or technical issues raised, technical

7 violations raised, but I saw something in Mrs. Hovind's

8 argument that I felt came close to, if not did actually raise a

9 question as to the --

10 And, Mr. Barringer, you can help me out here if you

11 can point me to it.

12 -- but did actually raise a question as to whether the

13 Counts 13 through 57 properly stated a claim.

14 MS. HELDMYER: An offense.

15 THE COURT: An offense. Excuse me.

16 MS. HELDMYER: Yes, Your Honor. I don't necessarily

17 disagree with that. I think the arguments were -- frankly, I

18 found them a little hard to follow. I do believe that,

19 frankly, they more than likely did raise issues regarding

20 failure to state an offense in those counts. I believe the

21 grounds are quite different than what we're arguing here today.

22 But in terms of just arguing the deficiency in the indictment,

23 I agree that they did that.

24 THE COURT: Okay. Well, then I need not belabor that.

25 Okay. Ms. Heldmyer, thank you very much.



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1 MS. HELDMYER: Thank you, Your Honor.1 0 : 2 4 A M

2 THE COURT: Let's take a brief recess. We'll take ten

3 minutes and come back in, and I'll hear rebuttal from defense

4 counsel. So we'll take ten minutes. We'll be in recess until

5 10:35.

6 (Recess.)

7 THE COURT: We'll continue now with rebuttal. We'll

8 start with Mr. Barringer.

9 MR. BARRINGER: Again, thank you, Your Honor.

10 Ms. Heldmyer said so many things that I think I

11 objected to that I'm going to work -- have to struggle to work

12 my way through each of them and do so relatively quickly.

13 But let me start first with the allegation that some

14 of these other cases dealt with amounts less than $10,000 is

15 the totality of the charge in any one individual count that

16 held through conviction. I reread Nall. I reread Shirk, and I

17 reread a couple of others as we were going through our

18 arguments. None of those cases is just a below $10,000 amount,

19 period. Each of them, including Shirk, dealing with three or

20 four checks within a two-day period of time twice, or Nall,

21 where it was three checks for the first count and then the

22 8,000 as part of the 50 for the second. All of them dealt with

23 over $10,000. That, I believe, is critical.

24 In addition, even the Court's jury instruction, the

25 one we've talked about, and the Court's reference the last



68

1 sentence at length, but the beginning portion of that1 0 : 3 6 A M

2 paragraph, which starts: To structure a transaction means to

3 deposit or withdraw or otherwise participate in a transfer of a

4 total of more than 10,000 in cash or currency by or to a

5 financial institution or bank by setting up or arranging a

6 series of separate transactions each involving less than 10,000

7 individually are, thereby, intentionally evading the currency

8 reporting requirements that would have applied if the

9 transaction had not been so structured.

10 Think of that -- and that last portion is really

11 irrelevant to what we're now talking about, when you look at

12 that first part, because the Court has defined as the Eleventh

13 Circuit pattern instruction concerns that it still has to be

14 more than $10,000 that you are structuring. That simply did

15 not happen here. The government, however, is trying to say

16 that it is listed here by a series of different events that

17 we've not talked about or hadn't gotten to previously. The

18 first one is that there is more than $10,000 in the bank and,

19 therefore, if we allege $9,500, the government argues, then

20 we've accomplished the process because we've shown that there

21 is more than $10,000 sitting in the bank, but that's not what

22 the charge was and it's not even what the instruction

23 accomplishes with respect to what the evidence showed because

24 the instruction says setting up a series of transactions, each

25 of which total more than 10,000 by doing a series of



69

1 transactions, each which is less than 10,000, more than 10,000,1 0 : 3 7 A M

2 less than 10,000, the multiple of less gets you to the more

3 than 10,000.

4 THE COURT: Again, but the regulation doesn't refer to

5 a series -- or isn't limited to a series of transactions.

6 MR. BARRINGER: So now how does the Eleventh Circuit

7 instruction that I've just referred to fit up with the

8 regulation that the Court is referring to that says, can take

9 one to be theoretically one transaction less than 10,000 and

10 that can be it. That's not even what the instruction, the

11 pattern instruction says, nor, quite frankly, did any of even

12 the extra language that the Court added, does that really

13 address where the government was at before it's argument is

14 now?

15 THE COURT: The language that the Court added at the

16 end was added because of and I'll -- because of the argument

17 that I -- because the argument that Mr. Richey made as I

18 interpreted it. And I don't think that that language has any

19 bearing, whatsoever, on the issue that we're all now

20 addressing. So you and I agree on that.

21 MR. BARRINGER: Now, continuing on with some of the

22 other things that Ms. Heldmyer said, she referenced the fact

23 that evidence was adduced, deduced, whatever word that is, that

24 at trial that the money taken out was necessary to pay

25 employees. Do you remember what Special Agent Evans



70

1 specifically said in direct examination, not cross-examination,1 0 : 3 9 A M

2 but direct examination, when asked that question, can you find

3 the correlation? Can you find a pattern for taking the money

4 out? No, no pattern, nothing there.

5 Now, do you see how the argument has changed to try to

6 fit, yet again, with where the government's position is, first,

7 there was no pattern, which I think was designed to take off

8 into the forfeiture side of it. Now there is a pattern. There

9 is a correlation that the money was needed specifically to pay

10 employees and the government is having to change its theory

11 after the trial to make the indictment still hold with the

12 facts of the case to try to fit it altogether as yet a crime.

13 That is not exactly what happened.

14 The Court also phrased a question to Ms. Heldmyer that

15 was along the lines of, do you need -- or what do you need to

16 show that each count demonstrates that the defendants knew and

17 were intending to evade the reporting requirements, the

18 specific language of the indictment and the specific language

19 of the statute? What evidence do you have that shows that?

20 It's the totality of the activity? And I think that's really

21 where a flaw is in the government's case.

22 It struck me, as the Court asked that question, that

23 if they have to look at, okay, look what the Hovinds did for 13

24 months in taking all these checks out to show that the

25 knowledge of evasion exists. Remember that each count has to



71

1 establish facts in and of itself and now -- and the government1 0 : 4 0 A M

2 has admitted that each count has to establish the facts in and

3 of itself. Everybody is in that position. The government

4 said, with respect to Mr. Evans on the witness stand, with

5 respect to arguments in brief and today, each count states on

6 its own all the elements necessary. But the court phrased the

7 question, how do you know that they are evading the

8 transactions? Are you having to look at everything to do so?

9 And if you have to look at everything, you've suddenly stepped

10 out of each count. They, by their own discussions, have missed

11 the point that they didn't prove that the defendants

12 specifically knew and evaded, not willfulness obviously, but

13 knew and evaded the reporting requirements themselves. The

14 allegations that, well, Glen Stoll said, well, remember don't

15 go over the 10,000, or Brian Popp saying the banks reporting

16 requirements might -- and I don't remember that testimony. But

17 I do know with respect to Glen Stoll, I tried to pin down

18 somebody, anybody, with a date on that, asking all kinds of

19 questions of all kinds of witnesses and nobody could give me an

20 answer. Special Agent Schneider didn't know when it came out,

21 to be perfectly honest. And from the evidence, as best we

22 could show, it was happening at the time that the money was not

23 being cashed and cash taken out anymore. As Mr. Richey said,

24 that's after the fact. There wasn't evidence of showing that

25 there was an evasion of the reporting requirements specifically



72

1 known and taken by the Hovinds. 1 0 : 4 2 A M

2 Now we've drifted off into the mens rea side of it,

3 but it points out once again, number one, we're not arguing

4 multiplicity, and to the extent that anybody suggested it, I've

5 never gone there. And secondly, each count has to stand on its

6 own, and I believe that the $9,500 by itself is deficient. But

7 if the Court or the government is taking the position that you

8 have to get over or look at all the other counts or look at all

9 the activity in general in order to show evasion, then that

10 doesn't fit the pattern either, because if each count has to do

11 it, it's not there. And I know I ran over that twice, but I

12 want to make that point that that's something that has jumped

13 out at me as being a problem with, again, how the indictment

14 and the evidence and everything else fits together.

15 Ms. Heldmyer indicated that in looking at a syllabus

16 of Ratzlaf and dealing with as relevant here, and I really

17 think dealing with what is a structured transaction, a

18 definition within Ratzlaf, and I really think what that

19 syllabus is talking about is the small portions of the

20 statutes, the specific statutes that are questioned in that

21 case as opposed to a small portion of the individual statutes

22 because if you flip to page 136, the ones everybody cited to,

23 it's just a flat out straight statement. It is illegal to

24 structure transactions, i.e., to break up a single transaction

25 above the reporting threshold into two or more separate



73

1 transactions for the purpose of evading a financial1 0 : 4 3 A M

2 institution's reporting requirement. That's really where the

3 Eleventh Circuit pattern instruction was at. In terms of what

4 I read to you as I came back up here for purposes of the

5 rebuttal and what I was talking about, that's exactly the same

6 thing I'm saying here, over 10,000 broken up into multiple

7 transactions. Everybody has said that. All the cases have

8 shown that. All the evidence has demonstrated that in all

9 those other cases. But here we start out with an allegation

10 that it's only 9,500 or only 9,600 for each of the counts,

11 nothing more.

12 THE COURT: But if you accept that definition, then

13 you cannot accept the regulation. Do you agree? How could you

14 ever -- let me rephrase that. When would you ever have

15 structuring as stated by the definition you just mentioned but

16 only involve one transaction?

17 MR. BARRINGER: The only way I can answer that that

18 fits everything else is defining what transaction suddenly

19 means as being the overall activity versus one act of cashing

20 or depositing money because the concept of one act of cashing

21 or depositing money, period, I don't believe fits Ratzlaf. I

22 don't believe it fits the statute. I don't believe it fits

23 even the Eleventh Circuit pattern instruction on what a

24 structure can be.

25 THE COURT: The pattern instruction is not law. I



74

1 mean, it's not. It's not law. It's not the law.1 0 : 4 5 A M

2 MR. BARRINGER: And yet, from a standpoint of what we

3 argued to the jury, we're limited in what we can say based upon

4 what the instructions are and where -- what we're telling the

5 jury the law means. I didn't propose that particular

6 instruction. The government did. I believe I objected to

7 certain portions of it and it was given as being this is what

8 you have to find.

9 THE COURT: Did you propose an alternative

10 instruction?

11 MR. BARRINGER: I proposed different language than

12 this -- in portions of it. I wanted to have it what cash or

13 currency meant. I wanted to have additional definitions

14 dealing with 10,000 being only in a single day. There were a

15 variety of things that I specifically objected to without

16 saying the entirety of it was faulty. But I didn't propose the

17 entirety of it. It was the government that proposed it. And

18 what we have to argue to the jury, what the evidence has to

19 sort of fit into the category of is where the instructions

20 really take us. While it may not be the totality of the law,

21 it is as, the Court defines it, I'm now going to read you the

22 instructions this is the law as I'm giving it to you. This is

23 what we're really telling the jury. And what we argue, we try

24 not to go beyond that because we face the objections and things

25 of that nature.



75

1 All the things we looked at here from the indictment,1 0 : 4 6 A M

2 to the evidence, to the instructions, to the statutes, and to

3 Ratzlaf now support exactly what the defendants have argued all

4 along. Only the regulations are hanging out there somehow is

5 saying something different, and I'm not sure that -- that it's

6 not inherently and internally conflicting with respect to some

7 portions of it, as I've talked about previously.

8 The bottom line is that none of the counts stand.

9 None of the counts can now in second -- hindsight, look back

10 and say, well, we showed evasion by saying that they knew what

11 was going on at the bank. I don't recall anybody, and I

12 believe it was Anne Dyson was the one from Amsouth that

13 testified about CTRs, and my understanding is that she never

14 told a client, never told a customer that she would file ever

15 file -- ever tell anyone they were going to file a CTR, never

16 did, not that she told everybody what CTRs are.

17 And secondly, the notice that's in the bank about

18 business days tells you when the bank's business day is going

19 to end and when the next day is going to start. That doesn't

20 say anything about this is a CTR trigger point, if you have

21 10,000 and you bring it in the first day and you bring it in

22 the second day, then you've covered it, I don't believe anybody

23 ever testified that that, the $10,000 amount is ever told to

24 customers specifically with respect to everybody that walks in

25 and can suddenly see signs that say $10,000 is the amount, if



76

1 you go over it, we're going to tell the IRS. I don't think1 0 : 4 7 A M

2 that exists in any bank that I've seen either.

3 So we have a question in terms of what the evidence

4 showed, but more specifically, dealing with where the

5 indictment was, where the facts were, where the instructions

6 were, and where the arguments were, and where the case law is,

7 not regulations, but where the case law is, none of these

8 charges is a crime. And I don't see any way around that.

9 THE COURT: All right. Thank you.

10 Mr. Richey.

11 MR. RICHEY: Thank you, Your Honor.

12 I think, once again, it's very clear that we're

13 dealing with a case of first impression since -- regarding use

14 cases, there is absolutely no case, especially in the Eleventh

15 Circuit, that's cited for a use case. So this is clearly a

16 case of first impression.

17 The other issue, or another issue that we're dealing

18 with is that Ms. Heldmyer stated that Ratzlaf is not the only

19 definition of structuring. That then raises an issue then of

20 how many definitions of structuring are there. And if there

21 are more than one definition, what definition did the

22 defendants know? How did they know that they were then

23 structuring a transaction. If there are so many definitions

24 that the courts and Congress and the regulations, the

25 Department of Treasury don't even agree as to what the



77

1 definition of structuring is? I think what has to be done,1 0 : 4 9 A M

2 what is always done is that a regulation cannot be read

3 separate and independent, otherwise it renders the other

4 definitions, the other regulations and statutes superfluous and

5 meaningless. They have to be read in conjunction, in

6 conjunction with the other regulations, in conjunction with the

7 statute, and in conjunction with Ratzlaf and the definitions of

8 the Court. When you read all those together, then you have a

9 correct definition of what structuring is. There is not

10 multiple definitions, as the government suggested. There is

11 one and they all fit within that same parameter.

12 THE COURT: Let me ask you the question I posed to

13 Mr. Barringer. If you accept the Ratzlaf definition or even

14 that in the Eleventh Circuit pattern instruction, when would

15 one transaction ever be sufficient to support the offense as

16 charged here?

17 MR. RICHEY: I know of absolutely no case that would

18 support that, Your Honor, no case law that would support one

19 transaction. They have --

20 THE COURT: But that's what the regulation provides

21 for. They have to show, and the indictment has to charge that

22 there was more money being structured than 10,000. Now, there

23 may have been only one -- I could forseeably see a situation

24 where, for example, there was $10,100 that needed to be taken

25 and the check was cashed for 9,000 and they were told that if



78

1 they took out more than that, that -- or deposited more, or1 0 : 5 1 A M

2 whatever the situation were, that it would file a CTR and they

3 chose then not to take the additional amount and somehow that

4 got back to the government and they were charged with that one

5 count, that could be a foreseeable situation.

6 But what we have here is a situation that is not that

7 way. You have to look at it as, even the government has

8 admitted, let's get rid of 14 through 57 and look solely at

9 Count 13. If we look at that as a sole count, if all the

10 arrests were dismissed and that's the only count, is there

11 structuring involved there?

12 Now, the government has for the first time today, I

13 believe, argued that they proved and argued that the defendants

14 actually needed more money than the 9,600 or $9,500. The

15 problem with that is that is not what the indictment charges.

16 The indictment in fact has between -- in each count has between

17 four and about 30 days when the checks were separate. And so

18 there is a time span between each count of around between four

19 to 30 days, separating each of them.

20 Also, the evidence at trial showed that the

21 withdrawals began at about 1996 or 1997, began with the amount

22 of $3,000 and steadily grew, and even the evidence showed that

23 many weeks the amounts withdrawn was only 7,500 or 7,800.

24 Agent Evans testified that those were not -- they didn't charge

25 those as structuring counts because they were not as egregious.



79

1 So there is no pattern, as Agent Evans testified, between the1 0 : 5 3 A M

2 salaries that were paid and the amounts withdrawn. So that is

3 a new novel argument that the government has made today, and

4 it's certainly not supported by the indictment, the charges

5 there.

6 With regard to the specific memo from Kent Hovind, the

7 memo said that for safety reasons they needed to stop

8 withdrawing that. But as Brian Popp testified, he continued to

9 be paid in cash because he didn't believe he was an employee,

10 and that was specifically how he worded it.

11 I think all of these things show how it is that this

12 case has evolved, how it has become a difficult case. And some

13 of these issues weren't raised because issues continue to be

14 raised even at this point after trial. But I think the

15 important thing is that there is only one definition of

16 structuring and all of the regulations, the statutes and the

17 courts' definitions have to be interpreted together, otherwise

18 you're running into a problem where some of them are being held

19 meaningless and superfluous. Based on that, there is

20 insufficient evidence and insufficient charges, in fact, for

21 any of the Counts 13 through 57 to survive.

22 THE COURT: Thank you.

23 All right. Well, you've all given the Court a great

24 deal to consider. I will continue to ponder this novel

25 question and do my very best to have an order for you all in,



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1 I'll say, the future, hopefully, the near future. This is1 0 : 5 5 A M

2 going to take me some time to go through -- again, some of the

3 arguments are new, newly raised, and to apply the arguments

4 against the case law and the legislative history as well.

5 Mrs. Hovind's sentencing has been continued.

6 Mr. Barringer, do you wish to address that? I don't believe

7 we've given a new date yet for that sentencing.

8 MR. BARRINGER: We haven't, but as I was traveling

9 down here, apparently the new presentence report hit my

10 computer and was sent down to Mrs. Hovind for me to see. I've

11 not looked at it yet, but there is a new presentence report

12 that's been filed. Will I have a specific time that I need to

13 respond to that by?

14 THE COURT: I'm not going to give you a time today.

15 Let me look at it. This must be based on the revised offense

16 level calculation. Is that right?

17 MR. BARRINGER: Yes, I believe so.

18 MS. HELDMYER: That's correct.

19 THE COURT: I haven't seen it. Let me look at that.

20 I will -- I'll put something out in writing advising of dates

21 for objections when I have a better idea of when we'll

22 reschedule the sentencing.

23 Okay. Anything else? Well, again, thank you all.

24 Court will be in recess.

25 (Proceedings concluded at 10:56 a.m.)



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3 I certify that the foregoing is a correct transcript from the record of proceedings in the above-entitled matter. Any

4 redaction of personal data identifiers pursuant to the Judicial Conference Policy on Privacy are noted within the transcript.

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6 s/Gwen B. Kesinger 12-30-07

7 _____________________________ ________________

8 Gwen B. Kesinger, RPR, FCRR DateOfficial Court Reporter

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Documents

USA v Kent Hovind Trial Transcripts (1 of 8)