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ABC News: Spitzer, Not the Prostitution Ring, Was the Subject of Investigation

Update: According to the New York Times, the Attorney General did authorize investigation of Spitzer:

The inquiry, like many such investigations, was a delicate one. Because the focus was a high-ranking government official, prosecutors were required to seek the approval of the United States attorney general to proceed. Once they secured that permission, the investigation moved forward.

*****

ABC News reports New York Governor Eliot Spitzer was the initial subject of the Justice Department investigation and it was his suspicious money transfers that led to their discovery of the prostitution ring. ABC says the feds are likely to charge him with the crime of structuring financial transactions:

The federal investigation of a New York prostitution ring was triggered by Gov. Eliot Spitzer's suspicious money transfers, initially leading agents to believe Spitzer was hiding bribes, according to federal officials.

It was only months later that the IRS and the FBI determined that Spitzer wasn't hiding bribes but payments to a company called QAT, what prosecutors say is a prostitution operation operating under the name of the Emperors Club.

And this:

The suspicious financial activity was initially reported by a bank to the IRS which, under direction from the Justice Department, brought kin the FBI's Public Corruption Squad.

"We had no interest at all in the prostitution ring until the thing with Spitzer led us to learn about it," said one Justice Department official.

More...

On the crime of structuring:

Structuring involves creating a series of financial movements designed to obscure the true purpose of the payments.

So this started as an IRS investigation into structuring and when it was determined it was the Governor, Justice brought in the the FBI's Public Corruption Squad?

How long was Gov. Spitzer doing business with the Escort service? According to the Affidavit for the Arrest and Search Warrants, the investigation commenced in October, 2007. Between then and last week, when they filed the complaint against the defendants, they got wiretaps, search warrants and examined 5,000 phone calls and text messages and 6,000 emails. They also got a confidential informant and undercover officers to infiltrate the group. The wiretap was obtained in January, 2008.

The search warrant for the e-mails was obtained on January 25, 2008. Before filing the Complaint against the defendants last week, they also examined the company's bank records for 2004 - 2008.

According to the affidavit, the Emporer's Club employees said most clients paid them either by wire transfer or direct deposit.

The criminal case against Emporer's Club was filed by complaint, not Indictment. There is no Indictment of anyone yet. Did they not use the grand jury? Why not?

Update: As I wrote in a comment below, could they be trying to squeeze Spitzer into pleading to an information charging structuring and threatening they will take it to a grand jury on the more serious Mann Act charge if he doesn't?

Update: From Peter G. in the comments on what it would take for a structuring convicton:

there was to be or would have been a transaction with the financial institution (deposit or withdrawal, especially) of more than $10,000, to be done with monetary instruments (cash, especially), but the transaction was intentionally broken up into smaller units of under $10,000 for the purpose of evading the bank's (known) reporting requirement under 31 USC 5313 and 31 CFR 103.22 or for the purpose of evading taxes. 31 CFR 103.11(gg), made criminal by 31 USC 5324.

Update: Jane at Firedoglake writes:

A source familiar with the investigation into the Emperor's Club prostitution ring says that the defendants in the case are the head of the club, the day-to-day business manager and two booking agents. Further, the case has apparently been done for quite a while, and the US Attorney in charge -- Michael Garcia -- "has been tearing his hair out" trying to get someone higher up at the DoJ in Washington to look at the prosecution memo and sign off, because of the need to get their authorization before indicting a public figure.

I suspect that means DOJ did not sign off on it and there is no authorization to prosecute Spitzer. Why? Because as I've mentioned a few times, the other defendants were charged by Complaint, rather than by a grand jury Indictment. I've been wondering why, since this is a multi-month investigation. Usually cases are brought by Complaint when its a fast bust and there's no grand jury sitting before the defendants have to appear in court.

Here the defendants in the Emporers' Club case were charged by Complaint. Did the case not go to the grand jury and if not, why? Was, as Jane writes, a request made by the U.S. Attorney to convene a grand jury into Spitzer? If so, did Main Justice nix it?

Lots of unanswered questions.

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  • Display: Sort:
    Wow (5.00 / 1) (#2)
    by andgarden on Mon Mar 10, 2008 at 07:26:04 PM EST
    Spitzer better get some police protection after he (likely) resigns. There are going to be some people out there who aren't too happy with him for apparently making them a target.

    It always goes back to: (5.00 / 1) (#3)
    by NJDem on Mon Mar 10, 2008 at 07:26:35 PM EST
    follow the money...

    prostitution = mob? (none / 0) (#6)
    by Kathy on Mon Mar 10, 2008 at 07:28:50 PM EST
    Cost of business.  They won't go after him.  They'll just set up shop somewhere else.

    Parent
    What are the chances... (5.00 / 3) (#5)
    by Alvord on Mon Mar 10, 2008 at 07:28:17 PM EST
    ... some wall street types (i.e. the bank) were out for some payback against Spitzer, who they loathed, when they reported his financial transactions to the IRS?

    that was the first thing (5.00 / 2) (#11)
    by joei on Mon Mar 10, 2008 at 07:36:12 PM EST
    that came to my mind... he has tonne of enemies in the financial industry

    Parent
    The Justice Dept would not have to (none / 0) (#69)
    by BernieO on Tue Mar 11, 2008 at 09:51:28 AM EST
    have Wall Street types to go after a rising star in the Democratic Party. Just look what happened with Don Siegelman. The Republican Party likes to target promising Dems before they run for a national office. Lee Atwater worked behind the scenes to smear Clinton the last time he ran for governor because he recognized Clinton as the Dem who was most likely able to defeat Bush in his run for a secons term.
    This does not excuse Spitzer breaking the law, but it is chilling to think that our Justice Department is participating in political witch hunts against Democrats. That may not be the case here, if the banks had good reason to report Spitzer, but it clearly happened to Governor Siegelman.

    Parent
    Doesn't pass my smell test (5.00 / 2) (#7)
    by ineedalife on Mon Mar 10, 2008 at 07:29:18 PM EST
    Money going out of his account made a bank employee suspect he was taking bribes? Right.

    I wonder if we will ever learn the identity of this good citizen? The Linda Tripp of the New York financial industry? Or a friend of Joseph Bruno? Or an entirely made up person to cover for their hit job?

    Not saying Spitzer should skate on this, but if there are political hits are going on we should know about it.

    I am dubious as well (5.00 / 3) (#10)
    by Jeralyn on Mon Mar 10, 2008 at 07:34:25 PM EST
    of the ABC report.

    Maybe he withdrew amounts over $10k within a 24 hour period using an atm machine?

    It does sound like someone dropped a dime on him, and I'm not sure I buy it was a bank employee.

    Parent

    Sounds like Senator Bruno and Schrub dropped the (5.00 / 1) (#15)
    by Harry Davis on Mon Mar 10, 2008 at 07:42:13 PM EST
    dime on Spitzer after Spitzer was caught tailing Bruno's activites.

    Parent
    I've always assumed that (5.00 / 1) (#19)
    by sarcastic unnamed one on Mon Mar 10, 2008 at 07:47:33 PM EST
    "someone" is always looking at high-profile pols' bank accounts.

    Parent
    "money transfers" (none / 0) (#13)
    by Kathy on Mon Mar 10, 2008 at 07:39:01 PM EST
    surely not cash withdrawals?  ATM machines have limits on how much and how often you can access, anyway.  The governor going to a bank and cashing a check made to "cash"?

    I assumed he was doing wire transfers, but I am just basing that on my interpretation of the wording.  

    Parent

    From what I understood of the complaint (5.00 / 2) (#24)
    by litigatormom on Mon Mar 10, 2008 at 07:53:30 PM EST
    he was avoiding wire transfers by sending cash through the mails.  ATMs usually limit you to $500 or $1000 in cash withdrawals per day.  So, I'm beginning to have a hard time understanding why a bank would be concerned by  cash withdrawals by Elliot Independently Wealthy Spitzer that necessarily had to be no more than 10% of the $10,000 limit. How could such withdrawals be "structuring"?

    Parent
    Actually (none / 0) (#49)
    by Andy08 on Mon Mar 10, 2008 at 09:43:34 PM EST
    you can increase these limits to much larger sums.
    The dafault is 500 or 1000; but you can change that
    to be --say- 3500 or more dependig on your account balance.


    Parent
    No, paying bribes (5.00 / 1) (#40)
    by gyrfalcon on Mon Mar 10, 2008 at 08:43:55 PM EST
    or blackmail or whatever.  Lord knows, Eliot Spitzer has no need of bribe money!

    Parent
    This All Has the Smell (5.00 / 2) (#12)
    by bob h on Mon Mar 10, 2008 at 07:37:37 PM EST
    of selective political prosecution to me.  They were obviously looking at his bank transfers.  Justice is not a priority of the Bush Justice Department; prosecution of Democrats is.

    A question and a thought (5.00 / 2) (#16)
    by Iphie on Mon Mar 10, 2008 at 07:44:06 PM EST
    For the lawyers here, what does this new info mean practically? If it is highly unlikely that he would be charged with a crime regarding the actual prostitution, is it more likely that he would be for structuring financial transactions? How serious is it and do the reasons for the structuring play any part when deciding to bring charges?

    Secondly, I'm watching a local political chat show and they are clearly unaware of this new information. They (the they being journalists) are mostly saying they think he will resign. I think that the fact that he was the target of this investigation and not just a collateral player changes the dynamic. I think it gives him room to say that this is a political witch hunt. I wonder.

    If this turns out to have been (5.00 / 1) (#22)
    by andgarden on Mon Mar 10, 2008 at 07:50:45 PM EST
    a political witch hunt, he could be saved. It's too bad that the people of NY had soured on him already.

    Parent
    Even if it was a political witch hunt (5.00 / 1) (#30)
    by litigatormom on Mon Mar 10, 2008 at 08:00:37 PM EST
    it seems like he really did use prostitutes. Not sure he can survive that politically even if the genesis of the investigation was a politically motivated structuring investigation.

    However, perhaps the Bush DOJ investigation should be broadened.

    Parent

    It is curious (none / 0) (#20)
    by Jeralyn on Mon Mar 10, 2008 at 07:47:45 PM EST
    especially because they held off on having a grand jury indict. Maybe they are trying to squeeze Spitzer to plead to an information charging structuring and threatening they will take it to a grand jury on the more serious Mann Act charge if he doesn't.

    Parent
    Structuring (5.00 / 1) (#27)
    by litigatormom on Mon Mar 10, 2008 at 07:58:34 PM EST
    Unless I am missing something, the amounts and frequency of the withdrawals don't sound like structuring to me. That may be what they started looking for, stumbling onto the Mann Act issues.

    Parent
    So, (none / 0) (#51)
    by Andy08 on Mon Mar 10, 2008 at 09:47:16 PM EST
    do you think that they didn't have enough for the structuring really but that by threatening w/Mann Act they could force a plea on structuring?

    Parent
    Could I also ask... (none / 0) (#44)
    by Oje on Mon Mar 10, 2008 at 09:15:21 PM EST
    The money transfer discussed in the affidavit "disappears" for what looks like a day. Could a sting operation intercept that money, hold it until Spitzer crossed state lines, and then release it once he is in DC to set up the implied Mann Act charges? If the deal/arrangement had been made in New York, would the Mann Act still be applicable?

    Also, when did the bank report Spitzer? I assume at the beginning, October 2007, but if it comes later than the whole operation was not triggered by the bank...

    Parent

    oops, "later than that" (none / 0) (#48)
    by Oje on Mon Mar 10, 2008 at 09:42:18 PM EST
    I get the feeling (5.00 / 2) (#29)
    by OxyCon on Mon Mar 10, 2008 at 07:59:11 PM EST
    that this was a Repub initiated witch hunt. Spitzer made alot of Repub enemies and as we all know, the Repubs are really good at using federal and state law agencies in order to enact their agenda of taking down prominent Democratic politicians.
    Don Siegelman anyone?

    Quite possible (5.00 / 2) (#37)
    by auntmo on Mon Mar 10, 2008 at 08:42:42 PM EST
    But   even  more,   the  banking/financial   industry  he  was  investigating    surely  wanted  to  find  some  dirt on him.   Thus,   the   "transfers"  way  below   $9999.

    Parent
    auntmo (none / 0) (#50)
    by OxyCon on Mon Mar 10, 2008 at 09:45:43 PM EST
    Is this my old buddy auntmo from the "political conundrum" message board?


    Parent
    Yes it is ! (none / 0) (#52)
    by auntmo on Mon Mar 10, 2008 at 09:55:13 PM EST
    Good  to    see  you  here.    Really  good  board.   And  fair.   :)

    Parent
    So good to hear from you (none / 0) (#54)
    by OxyCon on Mon Mar 10, 2008 at 10:04:22 PM EST
    I used to post under the name "Cognito" but changed to "OxyCon" just to stir that board up a bit after it was apparent that it was futile to argue with the right wingers there with rational arguments. It was alot more fun playing the game by their rules and giving them a few pokes too.

    Good posters such as yourself disappeared and that message board went downhill, so after awhile, I dropped AOL and began posting my thoughts on blogs instead.

    I'm really glad to know that you are around doing the same thing.

    Parent

    Wow (none / 0) (#60)
    by auntmo on Mon Mar 10, 2008 at 10:20:51 PM EST
    We  think   alike!   I  dropped  AOL  too;  all  the  Indian  moderators  named  "David" and  Susan  began  to  annoy  me in  terms  of  Americans  who  would  love  to have  those  jobs.    

    But   stick  around  here.....the posters  are  all   incredibly   informed , professional,   and  civilized.    Some moments  of  levity,  but   I've  learned  a lot just  reading  the posts  here.  

    Glad  you  found this  board;   it's  head  and shoulders  above  where  we  were  before.    

    Parent

    It may be a witch hunt. . . (none / 0) (#39)
    by LarryInNYC on Mon Mar 10, 2008 at 08:43:24 PM EST
    but they found a witch.

    Parent
    James (5.00 / 1) (#41)
    by Iphie on Mon Mar 10, 2008 at 08:44:30 PM EST
    Carville just said on CNN that he wouldn't be surprised if there were not some sort of political motivation behind the investigation. He didn't bring up the ABC story yet, but he is already suspicious.

    Can anone answer the question of why? (5.00 / 1) (#64)
    by clio on Mon Mar 10, 2008 at 10:46:53 PM EST
    The more I hear the less explicable it becomes.

    Spitzer is, supposedly, an intelligent, hard-driving, and relentless investigator.  He knew he made enemies with his previous prosecutions.  (I suppose that all prosecutors make enemies, whether the enmity is justified or not.)

    Why then would he engage in such reckless and self destructive conduct?  He, of all people, had to know how dangerous it was.

    This goes beyond stupid, IMO.

    I think power makes one devolve to (none / 0) (#66)
    by sarcastic unnamed one on Tue Mar 11, 2008 at 12:15:09 AM EST
    high school; it makes one think they are untouchable.

    Parent
    I don't think the Spitzer thing (none / 0) (#4)
    by litigatormom on Mon Mar 10, 2008 at 07:27:44 PM EST
    has anything to do with FISA warrantless wiretapping. That doesn't mean that the prosecution was politically motivated. We'll have to wait and see whether it looks like it was.  I doubt very much that Spitzer was "entrapped."  Why the feds were following his bank transfers in the first place is a little puzzling, but perhaps explainable.

    the bank reported it (5.00 / 1) (#8)
    by Jeralyn on Mon Mar 10, 2008 at 07:29:24 PM EST
    they are supposed to report suspicious activity, like when they think people are withdrawing $9999 to avoid the $10k reporting threshold.

    Parent
    Hmm. (5.00 / 1) (#9)
    by ineedalife on Mon Mar 10, 2008 at 07:33:44 PM EST
    What is the cutoff? They are supposed to report 10K, and $9999? How about $9998? Or 2 X $500. Seems like they have to report anybody then. I wonder how many times I have been reported.

    Parent
    I'll report you now . . . (5.00 / 1) (#26)
    by Big Tent Democrat on Mon Mar 10, 2008 at 07:57:50 PM EST
    the statutes (none / 0) (#32)
    by Jeralyn on Mon Mar 10, 2008 at 08:08:36 PM EST
    here's the statute on structuring and the regs are here, here and here.

    Parent
    The amount is not that important (none / 0) (#33)
    by Randinho on Mon Mar 10, 2008 at 08:35:44 PM EST
    I believe the intent is what's important. When I worked at ASCAP, I dealt with a radio station owner who owed money to an alleged drug dealer that IIRC was in excess of 60K. I believe the debt was paid in periodic installments ranging from 5K to 9K.

    The radio station owner pled guilty to structuring, was fined and spent a couple of years on probation.

    I agree with Jeralyn that they're probably using this to pry a plea on the Mann Act violations. He should resign. Now.

    Parent

    The regs: (none / 0) (#34)
    by Peter G on Mon Mar 10, 2008 at 08:39:38 PM EST
    All your links are for statutes, TL.  The regs are here.  A "suspicious transaction" is defined in the regs, and can be for as little as $5000, even though the reporting threshold is "more than" $10,000 (i.e., contrary to common belief, a cash transaction of exactly $10,000 is not reportable to IRS.  Banks are required to file reports on "suspicious" transactions, as defined.  Others, such as retailers, car dealers, professionals, etc., are merely encouraged to do so.

    Parent
    thanks Peter (none / 0) (#36)
    by Jeralyn on Mon Mar 10, 2008 at 08:41:31 PM EST
    appreciate the regs links. I'm typing too fast.

    Parent
    as peter g points out below (none / 0) (#38)
    by Jeralyn on Mon Mar 10, 2008 at 08:43:19 PM EST
    the regs are here. My links were all to statutes.

    Parent
    It doesn't sound like he was making (5.00 / 1) (#21)
    by litigatormom on Mon Mar 10, 2008 at 07:47:58 PM EST
    repeated transfers of $9999.  Indeed, the visits were "only" $5000 an hour. Unless he was doing this all the time, I don't see why this would have garnered the attention of the bank.

    Parent
    No. (5.00 / 1) (#23)
    by LarryInNYC on Mon Mar 10, 2008 at 07:53:12 PM EST
    the bank reported it

    the Government says the bank reported.  That covers a whole host of possibilities, including notification to the bank saying "please report cash transactions on the following accounts. . ."

    Parent

    also (none / 0) (#14)
    by Kathy on Mon Mar 10, 2008 at 07:40:51 PM EST
    "payments to QAT" ...  you don't get a cash receipt.  Must be wire transfers or credit cards, because how else would they have proof that the money was paid to this company?  THe wording seems certain.

    the affidavit says (5.00 / 1) (#17)
    by Jeralyn on Mon Mar 10, 2008 at 07:45:05 PM EST
    the group preferred wire transfers or direct deposits. I wish the media would stop calling it an Indictment. There has been no indictment filed yet.  Just a complaint (Information) supported by an affidavit. The government has 30 days from unsealing the complaint to get a grand jury to return an Indictment.If they don't, the defendants will get a preliminary hearing where the Judge decides if there is probable cause agaisnt them.

    Parent
    Jerilynn (5.00 / 1) (#35)
    by auntmo on Mon Mar 10, 2008 at 08:40:51 PM EST
    Will   Numbers   1-8  (Spitzer  #9)  also  be  made  public,  or   will  this  be  a  Spitzer-only    media  thrashing?

    Parent
    According to an article I just read (none / 0) (#18)
    by sarcastic unnamed one on Mon Mar 10, 2008 at 07:45:19 PM EST
    QAT takes/took CC's, cash, wire transfers and money orders.

    Parent
    The document (none / 0) (#25)
    by litigatormom on Mon Mar 10, 2008 at 07:56:00 PM EST
    makes repeated reference to Client-9's efforts to pay the agency by mailing cash to it in NYC.  

    Parent
    Tawdry. (5.00 / 2) (#28)
    by LarryInNYC on Mon Mar 10, 2008 at 07:58:52 PM EST
    Can you imagine Spitzer sitting there trying to wipe the fingerprints off a stack of twenties, then stuffing the into an enveloping and trying to get loose long enough to get it into a mailbox?

    Parent
    All too human (5.00 / 1) (#31)
    by andgarden on Mon Mar 10, 2008 at 08:04:27 PM EST
    uh oh (none / 0) (#42)
    by Kathy on Mon Mar 10, 2008 at 08:45:16 PM EST
    mailing cash for illicit activity.  Al Capone territory.  Call in the postal inspectors.

    Still not sure how they confirm cash was sent to QAT.  He must have used other methods to pay as well.

    Parent

    It's not "structuring" unless ... (none / 0) (#43)
    by Peter G on Mon Mar 10, 2008 at 08:53:03 PM EST
    ... there was to be or would have been a transaction with the financial institution (deposit or withdrawal, especially) of more than $10,000, to be done with monetary instruments (cash, especially), but the transaction was intentionally broken up into smaller units of under $10,000 for the purpose of evading the bank's (known) reporting requirement under 31 USC 5313 and 31 CFR 103.22 or for the purpose of evading taxes. 31 CFR 103.11(gg), made criminal by 31 USC 5324.  (links in Jerri's and my comments above).

    Does it constitute structuring if (none / 0) (#45)
    by badger on Mon Mar 10, 2008 at 09:29:37 PM EST
    you make a series of payments furthering an on-going criminal enterprise?

    For example, is Client-9 possibly a co-conspirator since Mann Act violations were allegedly initiated at his request, and if he is, then do his series of payments constitute structuring, since they were in furtherance of the same on-going conspiracy?

    Parent

    I think he would (none / 0) (#47)
    by Jeralyn on Mon Mar 10, 2008 at 09:39:03 PM EST
    be more an aider and abetter rather than a co-conspirator. Also, we only know of one request to  have a woman travel interstate from NY to D.C. While the affidavit indicates (and I've written) he seems to have been a repeat customer, there's no indication any other trysts were outside N.Y.

    But, along the lines of where you are headed, since he's so familiar with how prostitution rings launder money and yet still made cash payments to the company, intending to disguise that he was the source of the funds, could he be charged with aiding and abetting the other defendants' money laundering?

    Just thinking out loud.

    Parent

    It is not "structuring" (none / 0) (#56)
    by Peter G on Mon Mar 10, 2008 at 10:04:49 PM EST
    ... to conduct a transaction for the purpose of obtaining funds to commit an offense.  The purpose of furthering an offense does not make the series of transactions "structuring" either.  To structure is defined by the Treasury regs for banks (rather poorly, imho) as follows:  31 CFR 103.11(gg):

    (gg) Structure (structuring). For purposes of section 103.53 [erroneous cross-ref; correct reference is 103.63], a person structures a transaction if that person, acting alone, or in
    conjunction with, or on behalf of, other persons, conducts or attempts to conduct one or more transactions in currency, in any amount, at one
    or more financial institutions, on one or more days, in any manner, for the purpose of evading the reporting requirements under section 103.22
    of this part. "In any manner" includes, but is not limited to, the breaking down of a single sum of currency exceeding $10,000 into smaller sums, including sums at or below $10,000, or the conduct of a transaction, or series of currency transactions, including transactions at or below $10,000. The transaction or transactions need not exceed the $10,000 reporting threshold at any single financial institution on any single day in order to constitute structuring within the meaning of this definition.

    I'm having trouble seeing the potential structuring crime here, Jerri.  Help me out?

    Parent

    could it be using (none / 0) (#58)
    by Jeralyn on Mon Mar 10, 2008 at 10:14:59 PM EST
    atms to withdraw cash and then mailing the cash to the company in what the Government would allege is a related series of transactions totaling more than $10K -- done to avoid reporting requirements?

    Parent
    I guess I'm wondering (none / 0) (#67)
    by badger on Tue Mar 11, 2008 at 12:27:00 AM EST
    about that "series of currency transactions" phrase in the second-to-last sentence. My guess (maybe more from export than banking regs) is that might hinge on whether the "series" is for a single purpose or multiple purposes - for example, whether I'm paying for a single lot of product in one or several payments, or whether I'm buying different lots with different associated payments.

    So I guess my reasoning is that paying for different girls with different transfers might be considered the same series of payments, since the individual transactions are illegal, but the series of payments is in furtherance of the same, single, on-going  conspiracy.

    For example, is there one act of conspiracy based on multiple overt acts underlying it, and do the transfers apply indvidually to the overt acts or as a series of transfers to the single conspiracy?

    It seems like an important distinction, because from the press release it appears there's a lot more jail time associated with money laundering than the other acts.

    Parent

    I don't think those are the only possible regs (none / 0) (#53)
    by Beldar on Mon Mar 10, 2008 at 09:58:46 PM EST
    31 U.S.C. § 103.18 says $5k is enough to trigger the banks' filing requirement if the bank "knows, suspects, or has reason to suspect that" the transactions had —

    no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the bank knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction.

    A large series of $5k+ cash transactions — which doesn't sound unlikely, considering the rates quoted for these callgirls — would probably be enough to get you past the grand jury, past a motion to dismiss, and to the jury.

    Parent

    That's a "suspicious transaction" report (none / 0) (#59)
    by Peter G on Mon Mar 10, 2008 at 10:15:18 PM EST
    Ok (although the cite is "31 C.F.R." not "31 U.S.C."), but what's the offense committed by the customer that you see? The bank has a duty to report suspicious transactions, and they comply with that duty.  The customer (Gov. Spitzer, hypothetically) is engaging in suspicious transactions, which are reportable by the bank.  That's not an offense.  He's not structuring his transactions to evade "suspicious transaction" reporting, which admittedly could be an offense; he's flat out engaging in "suspicious transactions."  Again, not an offense.  He's not laundering, because the transactions are not being conducted with "proceeds" of any offense (that's going to happen later, when the pimps bank the cash received by the prostitutes).  And he's not "structuring" any transaction of more than $10G by making separate cash withdrawals of $5000 +/- for separate trysts, because none of these meetups, apparently, require or involve a payment of more than $10G.  Again, I don't see it.

    Parent
    Yes, but ... (none / 0) (#63)
    by Beldar on Mon Mar 10, 2008 at 10:37:45 PM EST
    Yar, sorry for the typo (U.S.C. --> C.F.R.).

    My point is that lots of cash withdrawals between $5k and $10k for could have been done to avoid triggering the mandatory reporting of $10k+ currency transactions.  Someone who knew of the mandatory $10K+ cash transaction reporting, but didn't know about the possibility of back-up reporting of "suspicious" transactions of $5k+, might well be convicted.  31 C.F.R. § 103.22 is what he was structuring to avoid (by staying below $10k).  31 C.F.R. § 103.18, though, is what ended up catching him. And the statute under which all these reporting requirements are promulgated is 31 U.S.C. § 5313(a). The statute Spitzer allegedly violated, though, would be 31 U.S.C. § 5324.

    (High danger of further typos; this stuff makes me go MEGO (mine eyes glazeth over) pretty quickly, and it's getting late.)

    Parent

    Tell me why this wouldn't be a crime (none / 0) (#68)
    by Beldar on Tue Mar 11, 2008 at 01:59:18 AM EST
    There's no requirement anywhere in the statute or the regs that the money he's withdrawing be used for some criminal purpose.  Nor is there a requirement that it be spent in a single transaction.

    Implied into the system is that the defendant did need to withdraw at least $10k+, though.  And he's aware, at least vaguely, of 31 C.F.R. § 103.22, which makes it mandatory to report currency transactions of $10k+.

    Okay, assume for purposes of argument that Spitzer, a nice button-downed rich kid whose family has always had tax accountants go over their records to get every deduction, routinely puts almost everything he spends on debt or credit cards. He doesn't ordinarily deal in much cash, not even for walking-around money in NYC (he takes limos instead of taxis, he doesn't eat at Mickey D's and pay cash).

    But a few times each year, he wants to pay for play.  He doesn't want to leave an Amex or wire transfer paper trail, so he wants to pay in cash.

    Maybe sometimes he structures two play-dates for consecutive nights on an out-of-town weekend, or maybe he is into the occasional three-way, or maybe he's just trying to avoid trips to the bank. But for whatever reason, he wants to have on-hand within a relative short period of time more than $10k in cash.  And he knows -- being a former organized crime prosecutor for Manhattan DA Morgenthal -- that if he goes to Citibank and takes out $12k in cash, it will trigger a Suspicious Activity Report.

    So Tuesday he goes to Citibank and withdraws $6k. Thursday he goes back to Citibank and withdraws another $6k.  He thinks he's in the clear.

    Rinse and repeat that scenario somewhat irregularly -- say, 15 times in a year, with an average periodicity of less than a month, maybe one (a long week when the wifey and daughters were in Europe) bumping up into the $20k within a week range.

    What he doesn't realize is that Citibank (or whoever), post-9/11, is really touchy about all big and irregular cash transactions.  And he doesn't know about 31 C.F.R. § 103.18. But Citibank -- taking seriously all that "had reason to suspect" language, confirming that there are individual transactions of more than $5k (even if they're not more than $10k), and finally noting that, "Hey, we can't think of any good reasonable explanation for the Governor of New York to be filling briefcases with cash this way," decides to be safe rather than sorry, punt, and file a report.

    IRS/Treasury says, Holy cow, a politican with suitcases of cash, yada yada. They're ultimately disappointed that it's not bribery, it's just prostitution. On the other hand, it's expensive prostitution, and it's interstate prostitution. And by then they've got a great paper trail of withdrawals that can't be explained in any other way than by his splitting up, into closely spaced chunks, the more than $10k+ sums he needs.  With the wire taps they have him dead-to-rights on the underlying conduct.

    I haven't studied the regs exhaustively, and I'd agree that this may not fit the particular definition of "structuring" you quoted from 31 C.F.R. § 103.11(gg).

    But the scenario I've just described does fit the literal language of the statute, 31 U.S.C. § 5324(a), with or without a reg to specifically further define what "structuring" is: "[F]or the purpose of evading the reporting requirements of section 5313 (a) ... or any regulation prescribed under any such section [specifically, 31 C.F.R. § 103.22]," Spitzer "(1) ... attempt[ed] to cause a domestic financial institution to fail to file a report required under section 5313(a) ... or any regulation prescribed under any such section [again, specifically, 31 C.F.R. § 103.22]."

    I'm only suggesting that 31 C.F.R. § 103.16 explains the way he happened to get caught — not that he was trying to evade it. If at least some of the chunks were $5k+, that's what might have generated a report.

    Parent

    If it is political retaliation... (none / 0) (#46)
    by Oje on Mon Mar 10, 2008 at 09:35:52 PM EST
    The headlines from September and October 2007 would presumably suggest what else triggered or facilitated a federal investigation in October 2007:

    Spitzer Gets Victory in Inquiry - Sept 21

    In Latest Salvo in Albany, Subpoenas to Spitzer Aides - Oct 6


    Spitzer Goes on the Attack Once Again - Oct 21

    In Shift, Spitzer Is Expected to Back a Federal ID - Oct 27

    Chertoff Pushed Spitzer to Bend on License Idea - Oct 31

    Spitzer was already despised in places like Wall Street, but nothing ever emerged from a bank employee previously (as TPM stated earlier today). There would have to be new political motivations, presumably, to instigate a criminal investigation of a figure like Spitzer. I am not suggesting a nefarious reason behind the investigation, but a willingness for someone - bank teller or otherwise - to try to trigger an investigation of Spitzer.

    actually, the statute in question (none / 0) (#55)
    by cpinva on Mon Mar 10, 2008 at 10:04:30 PM EST
    relates to cash transactions only. this can be the deposit of more than $10,000 in cash, cashing a check of more than $10,000 or a series of transactions, within the same financial institution (branches/ATM's) within a reasonably close period of time. merely depositing a check, of any amount, doesn't trigger the statute's reporting requirements. neither do wire transfers. simply put, those transactions leave a paper trail behind, cash doesn't.

    as well, it is all trade or business activities that have the reporting requirement, not just financial institutions. if you pay your house painter $10,001 in cash (it better be the sistine chapel of house painting jobs!), he/she's required to report that.

    either the individual or business is required to file a Form 8300 with the IRS, providing specific information regarding said transaction/transactions. financial institutions are required to have procedures in place to enable them to identify "structured" transactions, and report them as essentially one event.

    the original (and continuing) purpose of the statute was to force businesses (with the threat of criminal liability) to stop being complicit in money laundering, and the underreporting of taxable income. 9 times out of 10, these events involve funds received as the result of illicit activities; remember al capone?

    i have performed many an 8300 audit. you'd be amazed, with all the publicity the statutes have gotten, how many idiots are still out there.

    Just added an update on reports of a memo (none / 0) (#57)
    by Jeralyn on Mon Mar 10, 2008 at 10:05:53 PM EST
    from the US Atty to Main Justice requesting permission to investigate Spitzer. See what you think.

    No prosecution of Spitzer has been authorized (none / 0) (#62)
    by Peter G on Mon Mar 10, 2008 at 10:36:29 PM EST
    I agree.  He's a customer.  On the other hand, if the accusation is true and if he's Customer 9, he conspired to commit and committed a violation of the Mann Act, 18 USC 2421, a ten-year felony.  In practice, that crime is charged nowadays only against the organizers of commercial interstate (or international) prostitution rings, not against individuals, and particularly not customers.  To charge Spitzer with that would surely smack of political targeting.  The Mann Act does have a truly rich history of political abuse, though:  Jack Johnson, Charlie Chaplin, Chuck Berry, Frank Lloyd Wright -- all abusively prosecuted under this notorious law for political and/or racial reasons.  

    Parent
    And the 2422 section is 20 years (none / 0) (#65)
    by Jeralyn on Mon Mar 10, 2008 at 10:59:17 PM EST
    which also seems to apply. Question though: They charged the others with conspiracy to violate the prostitution laws, which made it 5 years instead of 10 or 20. Can you see them charging Spitzer with the   more serious substantive offense? I don't think so, as you say, it would smack of political vindictiveness.

    Parent
    Here's the DOJ Press Relase (none / 0) (#61)
    by Jeralyn on Mon Mar 10, 2008 at 10:27:20 PM EST
    Here's Here's the press release (pdf) the U.S. Attorney's office sent out when filing the case against the Emporer's Club defendants.

    Financial Trigger (none / 0) (#70)
    by seajane on Tue Mar 11, 2008 at 12:11:22 PM EST
    This makes perfect sense -- Regarding the money transfer trigger -- The regulations involving FinCEN are more comprehensive that people realize.  Financial Institutions are REQUIRED to report ALL suspicious activity to FinCEN.  FinCEN then creates a database of all these socalled "suspicious" transactions and "shares" the database will all interested enforcement agencies,  All this big brother stuff is perfectly legal and no warrants are required.  Also, if the financial institution happens to make a reporting mistake or reports an innocent transaction that is misinterpreted -- the consumer has no legal recourse.  The regulation holds the fiancial institution harmless.  The regulation's original purpose was to give enforcement agencies information needed for the "war on drugs" but since 9-11 the purpose has been expanded into the nether regions of "terrorism".  Due to the built in secrecy of FinCEN, we'll never know fr sure, but I'd bet my lunch that some Suspicious Activity Report was the initial trigger.

    Financial Trigger (none / 0) (#71)
    by seajane on Tue Mar 11, 2008 at 12:11:48 PM EST
    This makes perfect sense -- Regarding the money transfer trigger -- The regulations involving FinCEN are more comprehensive that people realize.  Financial Institutions are REQUIRED to report ALL suspicious activity to FinCEN.  FinCEN then creates a database of all these socalled "suspicious" transactions and "shares" the database will all interested enforcement agencies,  All this big brother stuff is perfectly legal and no warrants are required.  Also, if the financial institution happens to make a reporting mistake or reports an innocent transaction that is misinterpreted -- the consumer has no legal recourse.  The regulation holds the fiancial institution harmless.  The regulation's original purpose was to give enforcement agencies information needed for the "war on drugs" but since 9-11 the purpose has been expanded into the nether regions of "terrorism".  Due to the built in secrecy of FinCEN, we'll never know for sure, but I'd bet my lunch that some Suspicious Activity Report was the initial trigger.