09 Dec The Downfall of Dennis Hastert: Lesson in False Statements and Bank Withdrawal Structuring—Not the House Freedom Caucus

Posted at 17:15h in Criminal Defense by

So you were thinking that Speaker of the House is a cursed position? Enough to make a grown man cry (and cry and cry, and chain-smoke, and quit)? You can now add Dennis Hastert’s troubles to the list of woes besetting Speakers. Hastert, the longest-serving Republican Speaker, pleaded guilty in October to a two-count indictment charging him with laundering money and then lying about it to investigators, in an attempt to buy the silence of a man who claims Hastert sexually assaulted him when he was in high school. The indictment is here and the plea agreement is here. They’re worth reading, because they show how easily Hastert fell into the all-too-common trap of committing crimes while trying to cover up an act that was itself not ultimately charged (and probably never will be).

Hastert was charged with two offenses: structuring bank withdrawals to avoid bank reporting requirements (31 U.S.C. § 5324), and making false statements to FBI investigators who went to talk to him about the withdrawals (18 U.S.C. § 1001). Both of these offenses are famously malleable charging devices, and are notorious traps for the unwary who don’t get timely legal advice.

Let’s start with the “structuring” charge. This is one of those weird offenses where the actus reus is a perfectly legal act: withdrawing your own money from your own bank account. Shouldn’t you be allowed to do that? Sure—and you are. But banks are required to report to DOJ all transactions of more than ten grand. So the obvious trick, if you don’t want your transactions reported to the feds, is to make repeated withdrawals of, say, $9500. The statute aims to prevent this by criminalizing such under-ten-grand withdrawals, if they are done with the intent to avoid the reporting requirement.

Now here’s the thing: the prosecution does not have to show that the underlying purpose for which you intend to use the money is unlawful. The mere act of repeated withdrawals in amounts just under $10,000 is chargeable, if you did it to avoid the reporting rules. And that mens rea is really pretty easy to show—why else would someone take $50,000 out of his account in ten daily withdrawals of $9,999? The reason people structure bank withdrawals is that they don’t want a record of where the money’s going. In Hastert’s case, it was even easier, because the government knew (and alleged in the indictment) that he was doing it to pay off his accuser. The conceptual critique of the structuring offense, though, has some intuitive appeal: why should it be a crime to not want the government to know about some perfectly legal thing that you are doing? Hastert, as it happens, told the FBI that he was just keeping the money in cash at home because he didn’t trust the banking system. Now that’s a silly answer (and a silly thing to do– if the banking system collapses, you should have your wealth in guns and beef jerky, not in cash), but the point is that there’s nothing illegal about it. Bottom line—really, I can be put in jail just for structuring withdrawals to avoid bank reporting rules, even if I did nothing illegal at all with the money? Yes.

The second charge, section 1001 (false statements), is probably the most malleable of all the charges in the federal arsenal. Unlike perjury, for a false statements charge there’s no requirement that you make your statement under oath in a formal proceeding. And as with the structuring charge, there’s no requirement that you be doing or covering up anything illegal. (I mean, maybe you really were stockpiling beef jerky for the zombie apocalypse, and you were too embarrassed to tell the FBI about it. So you said you liked cash because you didn’t trust the banking system.)

It doesn’t matter what you lied about; the required element is that you knowingly made false statements to a federal agent, and your statements were “material” to an investigation. And “material” is an extremely broad concept; a material statement is one that “potentially could influence” the investigation.

Now, I think it’s very important to maintaining the rule of law that we have an effective deterrent to lying to investigators. Clam up, lawyer up, do what you have to do, that’s fine. As every lawyer will tell you right away when you call (and you should call): you do not have to talk to those polite, nicely dressed agents at the door. Tell them to go away!

But don’t lie. We cannot have the rule of law if we cannot enforce truth-telling. The thing is, Hastert’s case illustrates what many of us in the business see as a very problematic use of section 1001: “fishing for false statements.” A section 1001 fishing expedition goes like this: you already know some embarrassing (or worse) fact about your subject. You then send some agents out to ask the subject questions you already know the answer to, in the expectation that the subject will lie, and then (even if the rest of your case collapses) you can always charge section 1001.

The solution to the problem of section 1001 fishing would be much tighter judicial enforcement of the “materiality” element. The courts could hold that when the agents already know the answer to the question, the defendant’s statement, even if false, isn’t “material.” In Hastert’s case, for example, the agents knew exactly where the money went. So other than fishing for a false statements charge, it’s hard to see what the investigatory purpose was for asking him. The courts could so hold—but they haven’t yet. The closest we’ve come is the Ninth Circuit’s decision in the Barry Bonds case, but that’s a topic for another post.

So no tears for Hastert. If anyone should have known to hire a lawyer, it’s a former Speaker of the House. But he made wrong choices at every step. Now he’s going to be a convicted felon, and even if the underlying sexual abuse allegations were false, who’s going to believe it, given the clumsy and guilt-redolent way he went about trying to hush them up? The moral here is simple. Good lawyers can help you with your problems before your indictment is on the front pages. Getting legal advice right at the start—before you start stashing piles of cash (or beef jerky) in your garage—is the surest way to prevent much worse problems down the road.

Caleb Mason

Caleb Mason

Caleb Mason is a partner with Brown White & Osborn LLP. He is a former federal prosecutor, and handles a wide variety of civil and criminal litigation. He has authored numerous scholarly publications on criminal and constitutional law, and is a frequent media commentator on criminal-justice issues. He was recently appointed to the Police Commission for the city of Claremont, California.
Caleb Mason

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