We represent a fair number of medical professionals, but the facts of Dr. Sperazza’s case are a bit unusual.  Doctor S. and his partners operated an anesthesiology practice.   Apparently, whenever a patient paid by check (as opposed to by insurance or government program payment) the doctor would have his payment processors send the checks directly to Dr. Sperrazza.  Most of the time, the weekly bundles of checks totaled less than $10,000.  He would then cash groups of checks, always in amounts that totaled less than $9,000.  Over the course of several years the doctor apparently siphoned over $800,000 out of the anesthesiology practice in this manner.  He was then prosecuted for tax fraud, as well as the crime of “structuring” cash deposits to as to avoid the filing of a CTR.  A jury found him guilty, and he appealed his case to the Eleventh Circuit here in Atlanta. Among other things, he argued that the indictment itself was fatally flawed in the way this charging document described the “structuring” crime.

A couple of interesting things happened in the appeal.  First, the court had to figure out which version of the rules applied.  This was important in that for some unknown reason, the doctor’s legal team never challenged the indictment until after he was convicted.  The rule that talks about pretrial motions (Rule 12) was amended effective December 1, 2014, so the judges had to first figure out whether to use the new or the older version in order to decide how to handle this tardy challenge to the indictment itself.

Perhaps more importantly, Dr. Sperrazzas’s appeal led to a spirited discussion and split among the judges on an interesting question facing many business owners.  One of the newer judges on the Court, Judge Rosenbaum, dissented.  She noted that by affirming Dr. Sperrazza’s conviction the Court allowed federal prosecutors to bring a “structuring” case even if the person only starts out by having less than $10,000 in cash.  Judge Rosenbaum noted that the government’s position would permit a structuring case when “…a salaried person who earned $9,000 a week and deposited it in cash weekly, intending at least in part to evade the reporting requirement”.  The Judge went on to state that while “… most of us do not have the problem of trying to figure out what to do with our $9,000-per-week salary, but this same logic applies to any weekly salary payment under $10,000. And it does not end with weekly salary payments. As a result of today’s ruling, in this Circuit, no matter how small a sum of money a person may possess or otherwise enjoy a right to control—even if only a few dollars—he may find himself facing structuring charges if he goes to the bank often enough to create the appearance to the government of engaging in a pattern of financial transactions of $10,000 or less. I suppose that we will discover in the coming years how frequent a bank visitor one must be to imperil himself, but, in any case, it is clear today that [the structuring statute] has taken on a far broader reach than Congress ever intended.”

This case has important lessons.  Not the least of these messages is that lawyers need to scour indictments and raise challenges to indictments at the earliest feasible time.  Next, everyone needs to consult with an experienced practitioner if he or she is going to engage in a series of cash transactions in which currency is going into or out of a financial institution. Because tax cases are often the last resort when investigators want to go after a target, it is important to get an experienced federal criminal defense lawyer whenever one finds him or herself under investigation.

This also reminded me about a case we had a couple of years ago where we represented a young banker here in Georgia. Back when the real estate market was flying high, he was a superstar, bringing in millions of dollars in loans to developers who were fueling the Atlanta housing boom. When the market began getting soft, he was dismayed by how his bosses were treating him, so he took his book of business to another local bank. The bosses at the first bank did an “investigation”, and turned over to the authorities the dirt they had supposedly uncovered on this young banker. The local District Attorney thought he’d be a star also, and could get his name in the papers by indicting a banker just as the housing market was collapsing. They accused our client of claiming in memos to the loan committee that his developer/clients were putting 10% into the deals, when in fact they were not. The DA then got an indictment that charged our client with making “false entries” in the “books reports or statements” of a financial institution.

We were hired, and, like attorneys should do in every case, we went over everything with a fine-toothed comb. We discovered that the law they charged in the indictment had not been used for over 50 years! Next, we compared this old law, and the few cases interpreting it, to the actual language in the indictment. We came to the conclusion that the memos to the loan committee were not “false entries”, and even if they were, a memo to the loan committee is not a “book, report or statement” of a financial institution.

We took the unusual step of filing what is called a “demurrer” in Georgia. By this step, we basically argued that even if we admitted to the facts in the indictment, those facts did not constitute a crime. The judge was convinced we were right. He had us write up an order, which he then signed, and the judge then dismissed all the charges. This young banker got his life and career back, and we occasionally hear of how well he is doing.

None of us are perfect. But when as lawyers we are asked to defend another human being, that enormous responsibility requires that we look at every possibility when defending our clients. I know that most lawyers representing the growing number of indicted bankers face many of the same challenges.

In 1997 Congress passed the Hyde Amendment.* This law says that when an innocent person wins against criminal charges in federal court, the defendant can sometimes get his legal bills reimbursed by the government. This is important because defending against a federal criminal case is very expensive. Lawyers who do this kind of work are often the finest in their field, and they charge fees that recognize their superior skills. The Hyde Amendment provides for the innocent person to be reimbursed only if the prosecution’s position was “frivolous” or the prosecutors acted in “bad faith.”

The recent case of J. Mark Shelnutt is a perfect example of how even the innocent must pay massive legal bills. Mr. Shelnutt is a criminal defense lawyer. Federal prosecutors love going after lawyers who do such work, and they tried to make a massive federal criminal case against Mr. Shelnutt based on the word of some drug-dealing folks whom Shelnutt had represented in the past. The federal judge threw out some of the charges and the jury acquitted Mr. Shelnutt on the remaining counts against him.

After trial, Mr. Shelnutt wanted the government to pay him back for the legal fees he had to pay to defend his case. While the judge was sympathetic, he would not order the government to do so. A Daily Report article about the judge’s ruling is here.

Mr. Shelnutt’s situation shows how dangerous it is when federal prosecutors decide to focus on someone and bring criminal charges. The truly innocent defendant suffers the toll of years of stress, heartache and damage to their professional reputation. Such an innocent man or woman also is saddled with huge legal bills, and the innocent defendant rarely gets this money back, even under the Hyde Amendment.

Our previous post on Mr. Shelnutt’s money laundering case is here.

*The 1997 Hyde Amendment is unrelated to the 1976 Hyde Amendment that has recently been in the news regarding the health care debate.