Going to Jail for Spending your Own Money?

Dennis Hastert, former Speaker of the U.S. House of Representatives, has been indicted for "structuring" and for lying to federal authorities.  He has not been indicted for sexual abuse of a minor.  What's behind these charges?

The federal indictment alleges the following facts: (1) that Mr. Hastert sexually abused one or more students while he was a high school teacher and coach, (2) that he agreed to pay a former student ("Individual A") $3.5 million dollars in compensation for the abuse and not to disclose what happened, (3) from June 2010 to April 2012 Mr. Hastert made fifteen cash withdrawals from his bank accounts of $50,000 each and gave the money to Individual A, (4) in April 2012 bank officials questioned Mr. Hastert about the withdrawals, (5) after April 2012 Mr. Hastert limited his frequent withdrawals to less than $10,000, (6) when questioned by the FBI in 2014, Mr. Hastert lied about his use of the cash withdrawals.

United State law required that financial institutions file a Currency Transaction Report with the Financial Crimes Enforcement Network for any transaction or series of transactions involving cash of more that $10,000.  The purpose of the law is to identify potential drug trafficking, money laundering or other illegal activities.  The law applies to both withdrawals and deposits of cash.

Most of us will never make a $10,000 withdrawal or deposit, but many businesses do so every day.  Convenience stores, grocery stores and many other businesses process a large number of cash transactions every day.  Such businesses can be exempted from the reporting requirement as a "qualified business customer."  A qualified business customer is a commercial enterprise that (i) has maintained a transaction account at the exempting bank for at least two months; (ii) frequently engages in transactions in currency with the bank in excess of $10,000; and (iii) is incorporated or organized under the laws of the United States or a state, or is registered as and eligible to do business within the United States or a state.

Regardless of whether or not they would qualify as qualified business customers, certain businesses are ineligible for an exemption.  These businesses include financial institutions, vehicle or equipment sales, law firms, accounting firms, doctors' offices, auction houses, charter services (of ships, buses or aircraft), pawn shops, gaming, investment services, real estate brokers, title insurance companies, unions and marijuana related businesses.

If the transaction limit is $10,000, it is not difficult to determine you can avoid the reporting requirement by limiting your transactions to a lower amount, such as $9,500.  In response to this, federal law provides: "No person shall, for the purpose of evading the reporting requirements . . . (3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions."  Because he, allegedly, knowingly limited his withdrawals to avoid reporting requirements, Mr. Hastert has been charged with "structuring."

When questioned by the FBI about his cash withdrawals, Mr. Hastert is alleged to have said he was storing the cash because he did not feel safe with the banking system.  Therefor, he has also been charged with knowingly and willfully making materially false, fictitious and fraudulent statements to the FBI.

To many people, it is surprising to learn that it is illegal to lie to the federal government.  After all, we are all aware of out Fifth Amendment right not to incriminate ourselves.  Mr. Hastert could have asserted his Fifth Amendment right and refused to answer questions.  However, by choosing to (allegedly) answer the questions with lies, he committed another federal crime.

Mr. Hastert has not been indicted on any sexual abuses charges, likely for two reasons.  First, such matters would generally be a state charge, not a federal charge, and, more importantly, the statute of limitations on such a crime has likely expired.  Mr. Hastert stopped teaching high school in 1981.  Apparently the abuse stopped at that point.  In 1981, the statute of limitations on felony sexual abuse of a child was three years, meaning it is too late to charge Mr. Hastert with that crime.

This is an unusual case since Mr. Hastert is not alleged to have used his money for illegal purposes, rather, only to have structured his withdrawals.  It is surprising that this could not have been resolved with a plea agreement that would have allowed him to save face.  It will be very interesting to see the outcome.