United States v. Dimitrov, Stefan ( 2008 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 07-2759
U NITED S TATES OF A MERICA,
Plaintiff-Appellee,
v.
S TEFAN D IMITROV,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 05 CR 388-1—Milton I. Shadur, Judge.
A RGUED F EBRUARY 12, 2008—D ECIDED O CTOBER 3, 2008
Before E ASTERBROOK, Chief Judge, and R IPPLE and
R OVNER, Circuit Judges.
R OVNER, Circuit Judge. Stefan Dimitrov entered a condi-
tional guilty plea to one count of operating an unlicensed
money transmitting business in violation of 18 U.S.C.
§ 1960(a). He was sentenced to three months’ imprison-
ment to be followed by three years of supervised release.
Dimitrov now appeals, challenging the constitutionality
of § 1960 and the district court’s ruling on a motion in
limine decided before his guilty plea. For the reasons
explained herein, we affirm.
2 No. 07-2759
I.
In 1998 Dimitrov, a Bulgarian immigrant, began operat-
ing an institution known as the Bulgarian Cultural Center
on Irving Park road in Chicago. Dimitrov and his wife at
the time, Tatiana Dimitrova,1 offered a number of services
to the Bulgarian community through the Cultural Center,
including document translation and assistance with
everything from green card applications to locating
employment. The Cultural Center also contained a library
of Bulgarian books and videos, jewelry from Bulgaria for
sale, and a small kitchen. According to Dimitrov, people
began asking for assistance transferring money to Bulgaria.
Initially he assisted others by translating the money
transmitting forms into English and using his personal
checking account to transfer the funds. As the number of
requests for help transferring money increased, he
opened a separate account at TCF Bank to transmit money
to Bulgaria.
The money transmitting service supplied the bulk of any
income that Stefan and Tatiana made running the Cultural
Center. The Dimitrovs charged a flat $20 fee for the service
in addition to a small (usually .5%) percentage of the total
amount transferred. The Department of Immigration and
Customs Enforcement began investigating the Dimitrovs’
business after reviewing bank records from TCF Bank
suggesting that the Dimitrovs may not have a required
license to operate a money transmitting business. The
1
Stefan and Tatiana divorced before Dimitrov entered his
guilty plea, and he has since remarried.
No. 07-2759 3
bank records revealed deposits into an account named
“B Connection,” which Dimitrov used to wire money to
the Bulgarian Post Bank in Sofia, Bulgaria. Investigating
agents then used the bank records to identify Bulgarians
who had used Dimitrov’s money transmitting business.
One of these individuals agreed to cooperate with the
agents and explained that he had wired money to Bulgaria
using B Connection on multiple occasions. He would
give one of the Dimitrovs the cash for wiring, the name
of the intended recipient of the money, and the Bulgarian
equivalent of the Social Security number of the recipient.
The cooperating individual recounted that his family
members later retrieved the money from the Bulgarian
Post National Bank. In later transactions, Dimitrov made
the process more secure by having customers deposit
their funds for transfer directly into the account at TCF
Bank. Between January 2003 and April 2005 the Dimitrovs
transmitted approximately $3,000,000 to Bulgaria on
behalf of their customers.
Although the Dimitrovs’ money transmitting business
was by all accounts a legitimate one, it lacked the license
required by Illinois for money transmitting. 205 ILCS
657/10. That oversight amounted to a felony by virtue
of 18 U.S.C. § 1960(a), which prohibits operating an
“unlicensed money transmitting business.” Such a business
is defined by reference to state law, making it a violation
of § 1960(a) to operate without an appropriate money
transmitting license where the failure to have a license is
punishable “as a misdemeanor or felony under State law,
whether or not the defendant knew that the operation
was required to be licensed or that the operation was so
4 No. 07-2759
punishable.” § 1960(b)(1)(A). Under Illinois law, the
failure to obtain the required money transmitting license
is a Class 3 felony. 205 ILCS 657/90(h).
Instead of the required money transmitting license,
Dimitrov obtained a Limited Business License from the
City of Chicago “for general sales, service and office
operations/or businesses that do not fall under another
license category and are not exempt from City licenses,” see
Chicago, Ill., Mun. Code § 4-4-020, which he believed
discharged his licensing obligations. That belief, if genuine,
became less tenable in September 2004, when TCF Bank
sent him the first of several letters requesting verification
of the registration and licensing status of his money
transmitting business. The letter included a form entitled
“Verification of Licensing and Registration for Money
Service Business” which Dimitrov was instructed to
complete and sign. When it received no response
from Dimitrov, TCF Bank sent him a second letter in
November 2004 requesting that he verify his licensing
status and warning him that failure to do so would result
in closure of his account. In December, TCF Bank sent
Dimitrov a third letter informing him that it had reviewed
his account and determined that he was operating a
business that provided money services. That letter re-
quested a current copy of B Connection’s state license
and its anti-money laundering policy and procedures as
well as the IRS acknowledgment that B Connection was
registered with the Financial Crimes Enforcement Net-
work. The letter warned that failure to respond with the
requested verifications within 30 days would result in
closure of his accounts.
No. 07-2759 5
Presumably prompted by the letters from TCF Bank,
Dimitrov looked into obtaining a money transmitting
license in late 2004 or early 2005. Dimtrov and a business
associate, Hamid Rusef, traveled to Springfield and met
with Phil Sanson, a senior examiner for Illinois in the
Department of Financial and Professional Regulation.
Sanson explained to Dimitrov and Rusef the process for
obtaining a money transmitting license and also gave
them the application packet, which contains a checklist
of the required materials. Dimitrov, however, never
completed the application materials. When Dimitrov
failed to respond to its warnings, TCF Bank ultimately
closed the accounts associated with his money trans-
mitting business. He then transferred the accounts to
Bank One, where he continued transmitting money
through April 2005.
Dimitrov and his wife Tatiana were charged in July 2005
with one count of violating § 1960(a). Tatiana pleaded
guilty pursuant to a written plea agreement, but Dimitrov
initially intended to proceed to trial. On the day Dimitrov’s
trial was scheduled to begin, he elected to enter a condi-
tional guilty plea. Dimitrov’s decision came as a result of
the district court’s ruling on the government’s motion in
limine to prevent Dimitrov from presenting evidence
that he lacked knowledge of the Illinois licensing law.
Dimitrov planned to testify at trial about his Limited
Business License and his belief that the license relieved his
duty to obtain the required money transmitting license.
Before trial, the district court concluded that Dimitrov’s
belief that the Limited Business License was sufficient
6 No. 07-2759
would be irrelevant, because § 1960(a) does not require
knowledge of state licensing requirements. Faced with
this ruling, Dimitrov chose to plead guilty, but reserved
his right to challenge the constitutionality of § 1960(a) to
the extent that it does not require the defendant to
know that his conduct is illegal.
II.
On appeal, Dimitrov argues that § 1960(a) is unconstitu-
tionally vague. Specifically, Dimitrov claims that the
statute lacks a mens rea element and so fails to give fair
notice of prohibited conduct. To understand Dimitrov’s
argument, a brief history of § 1960 is in order.
A. 18 U.S.C. § 1960(a)
Congress enacted § 1960(a) in 1992 in response to con-
cerns that nonbank financial institutions (money transmit-
ters, check cashers, and foreign exchange dealers) were
increasingly being used to transfer the proceeds of illegal
activity. See S. Rep. No. 101-460 (September 12, 1990);
United States v. Velastegui, 199 F.3d 590, 593 (2d Cir. 1999).
The original version of § 1960 provided in pertinent part
as follows:
(a) Whoever conducts, controls, manages, supervises,
directs, or owns all or part of a business, knowing the
business is an illegal money transmitting business, shall be
fined in accordance with this title or imprisoned not
more than 5 years, or both.
No. 07-2759 7
(b) As used in this section—
(1) the term “illegal money transmitting business”
means a money transmitting business which affects
interstate or foreign commerce in any manner or
degree and—
(A) is intentionally operated without an appropri-
ate money transmitting license in a State where
such operation is punishable as a misde-
meanor or felony under State law; or
(B) fails to comply with the money transmitting
business registration requirements under [31
U.S.C. § 5330], or regulations prescribed under
such section . . . .
18 U.S.C. § 1960 (1992) (amended 2001) (emphasis sup-
plied).
As part of the Patriot Act, Congress amended § 1960 on
October 26, 2001, in an attempt to make it easier to prose-
cute those responsible for funneling money to terrorism.
See Report from the Field: The USA PATRIOT Act at Work,
at 10, http://www.usdoj.gov/olp/pdf/patriot_report_from_
the_field0704.pdf. The amended version reads in perti-
nent part as follows:
(a) Whoever knowingly conducts, controls, manages,
supervises, directs, or owns all or part of an unlicensed
money transmitting business, shall be fined in accordance
with this title or imprisoned not more than 5 years,
or both.
(b) As used in this section—
8 No. 07-2759
(1) the term “unlicensed money transmitting busi-
ness” means a money transmitting business which
affects interstate or foreign commerce in any
manner or degree and—
(A) is operated without an appropriate money
transmitting license in a State where such
operation is punishable as a misdemeanor or
a felony under State law, whether or not the
defendant knew that the operation was required to
be licensed or that the operation was so punishable;
18 U.S.C. § 1960 (as amended October 26, 2001) (emphasis
added).
The 2001 amendments thus removed the scienter re-
quirement of the former version, making § 1960 a “gen-
eral intent crime for which a defendant is liable if he
knowingly operates a money transmitting business.” H.R.
Rep. No. 107-205, pt. I, at 54 (2001). Under the amended
§ 1960, the government no longer need prove that a
defendant was aware of state licensing requirements or
that he knew about the federal registration requirements
found at 31 U.S.C. § 5330 (requiring owners or controllers
of money transmitting businesses to register with the
Secretary of the Treasury). See id.; see also United States
v. Elfgeeh, 515 F.3d 100, 132 (2d Cir. 2008) (recognizing
that the amendment “made § 1960(a) stricter by eliminat-
ing the requirement of proof that the defendant knew that
a license was required”).
No. 07-2759 9
B. Dimitrov’s Vagueness Challenge to § 1960(a)
According to Dimitrov, § 1960 “does not contain a mens
rea element,” and therefore fails to give fair notice of
prohibited conduct. Dimitrov also maintains that because
§ 1960 is broader than necessary “to satisfy the legislature’s
intent,” it invites arbitrary enforcement. A criminal statute
is unconstitutionally vague if it fails to sufficiently define
prohibited conduct so that ordinary individuals under-
stand what is prohibited or fails to establish minimal
guidelines to prevent arbitrary or discriminatory enforce-
ment. Kolender v. Lawson, 461 U.S. 352, 357-58 (1983);
United States v. Watzman, 486 F.3d 1004, 1009 (7th Cir.
2007).
In United States v. Talebnejad, 460 F.3d 563, 568 (4th Cir.
2006), the Fourth Circuit considered and rejected a vague-
ness challenge to the amended version of § 1960. In con-
sidering the defendant’s contention that § 1960 was
unconstitutional by virtue of its failure to recognize
ignorance of state licensing requirements as a defense to
liability, the Fourth Circuit noted that, “[t]here is no
question that, at least under some circumstances, Congress
may dispense with a mens rea element, as it has clearly
done with respect to § 1960(b)(1)(A).” Talebnejad, 460
F.3d at 568 (internal citation omitted). By failing to ac-
knowledge this, Dimitrov conflates legal knowledge with
factual knowledge. True, the statute no longer contains
any requirement that a money transmitting operator
know that what he is doing is prohibited by state law. But
“[t]he rule that ‘ignorance of the law will not excuse’ is
deep in our law.” Lambert v. State of California, 355 U.S. 225,
10 No. 07-2759
228 (1958) (internal citation omitted); see also Cheek v. United
States, 498 U.S. 192, 199 (1991) (“[I]gnorance of the law or
a mistake of law is no defense to criminal prosecution.”).
Lambert itself is the only Supreme Court case to recognize
a “mistake of law” defense. The registration statute
invalidated in Lambert criminalized the act of being present
in Los Angeles as a convicted felon without registering,
regardless of one’s knowledge of the registration require-
ment.
Unlike the statute at issue in Lambert, § 1960(a) requires
the affirmative action of knowingly operating a money
transmitting business. See Talebnejad, 460 F.3d at
570 (contrasting passive presence regulated in Lambert
with the “unquestionably active conduct of operating a
business”). This is in contrast to the registration statute
in Lambert, where the Court noted that “[v]iolation of its
provisions is unaccompanied by any activity whatsoever,
mere presence in the city being the test.” Lambert, 355
U.S. at 229. Moreover, the Lambert Court emphasized that
there were no surrounding circumstances “which might
move one to inquire as to the necessity of registration.” Id.
Here, however, Dimitrov operated his business in a
highly regulated industry, and could reasonably have
been expected to know that there may be licensing re-
quirements. See Papachristou v. City of Jacksonville, 405
U.S. 156, 162 (1972) (“In the field of regulatory statutes
governing business activities, where the acts limited are
in a narrow category, greater leeway is allowed.”). The
fact that § 1960 does not include knowledge of the
licensing requirement as an element of the crime does not
by itself render it unconstitutionally vague. It is enough
No. 07-2759 11
that the statute requires a defendant to know the facts
that make his conduct illegal—i.e., that he is operating
an unlicensed money transmitting business. Accord,
Talebnejad, 460 F.3d at 570.
Nor are we convinced by Dimitrov’s argument that
ordinary individuals will not be able to differentiate
between an “appropriate” money transmitting license
and an inadequate one. Unlike the vagrancy ordinance
invalidated in Papachristou, 405 U.S. at 157-171, on which
Dimitrov relies, § 1960 provides objective criteria for
determining what is an “appropriate” license. The refer-
ence to “State law” in § 1960(b) makes it plain that an
appropriate license is whatever is required under state
law. Moreover, Papachristou explicitly distinguished “the
average householder” subject to the vagrancy ordinance
at issue from an individual in “business,” who would
presumably be alerted to the regulatory schemes gov-
erning his conduct. See Papachristou, 405 U.S. at 162-63. We
thus conclude that by referencing state law, the phrase
“appropriate money transmitting license” provides
individuals of “ordinary intelligence a reasonable op-
portunity to know what is prohibited.” Grayned v. City
of Rockford, 408 U.S. 104, 108 (1972). Given the language of
the statute, a reasonable person would understand that a
generic city business license would not pass muster as
a “money transmitting license.”
The objective criteria also satisfy us that the ordinance
is not so broad that it invites arbitrary or discriminatory
enforcement. Unlike the vagrancy and loitering statutes
the Supreme Court has struck down as unconstitutionally
vague, § 1960 objectively defines the illegal conduct:
12 No. 07-2759
operating a money transmitting business without the
license required by state law. § 1960(b)(1)(A). It thus does
not suffer from the chief infirmity of the unconstitutional
statutes in those cases on which Dimitrov relies, which
vest enforcement officials with wide discretion and
contain no objective standards to prevent arbitrary en-
forcement. See City of Chicago v. Morales, 527 U.S. 41 (1999)
(striking down anti-loitering ordinance that conferred
“vast discretion” on police to arrest individuals remaining
“ ‘in any one place with no apparent purpose’ ”);
Papachristou, 405 U.S. at 168 (noting “unfettered discretion”
vagrancy ordinance placed in hands of police). We thus
reject Dimitrov’s suggestion that § 1960(a) creates a “trap”
for unwary individuals engaging in innocent behavior.
The statute explains what is required of an individual
operating a money transmitting business with sufficient
clarity that an ordinary person can understand that
operating without a required state licence is prohibited.
C. The Government’s Motion in Limine
In a related vein, Dimitrov challenges the district court’s
refusal to allow him to present evidence that he was
unaware of the Illinois money transmitting license re-
quirements. Before trial, the government moved in
limine to prevent Dimitrov from testifying that he be-
lieved his Limited Business License sufficed. The district
court granted the government’s motion after reviewing
the Fourth Circuit’s decision in Talebnejad and concluding
that Dimitrov’s intended defense would be unavailing.
We review the district court’s evidentiary decision for
No. 07-2759 13
abuse of discretion. See United States v. Watts, 535 F.3d 650,
657 (7th Cir. 2008). As discussed above, Congress explicitly
removed the defense Dimitrov planned to present when
it amended § 1960. Because a defendant’s lack of knowl-
edge of the state licensing requirement is not a defense
to prosecution, the district court appropriately concluded
that Dimitrov’s proposed evidence would be irrelevant.
It was therefore not an abuse of the court’s discretion to
grant the government’s motion in limine. See United States
v. Krankel, 164 F.3d 1046, 1054 (7th Cir. 1998) (trial court
did not abuse its discretion excluding evidence that did
“not tend to prove or disprove an element of the crime
charged”).
D. Unconstitutional Delegation of Legislative Authority
Finally, Dimitrov attacks the constitutionality of § 1960
on the grounds that it amounts to an unconstitutional
delegation of legislative power. He claims that by relying
on state law to dictate whether the operation of a money
transmitting business without a license is criminal,
§ 1960(a) unconstitutionally delegates legislative power
to the states. See, e.g., A.L.A. Schechter Poultry Corp. v.
United States, 295 U.S. 495, 529-30 (1935). Dimitrov main-
tains that because the operation of a money transmitting
business is only a federal crime if the state legislature
has made it a felony or misdemeanor, § 1960(a) transfers
to the states its legislative function.
There are several problems with Dimitrov’s argument,
but the most pertinent one here is that he failed to preserve
it when he pleaded guilty. Following the district court’s
14 No. 07-2759
grant of the government’s motion in limine, Dimitrov
abandoned his plan to proceed to trial. To facilitate his
plea, the government drew up an “agreed statement of
facts.” In it Dimitrov admits that he operated a money
transmitting business without the license required by
Illinois law. It also states that Dimitrov possessed a
Limited Business License to do business in the City of
Chicago, and that he believed the license satisfied any
licensing obligations required of him. In agreeing to
plead guilty, Dimitrov reserved “the right to object to the
constitutionality and construction of Title 18 U.S.C. § 1960
as it relates to the mental state required to be in violation
of the law.”
Nowhere does the agreed statement of facts identify the
unconstitutional delegation argument Dimitrov now raises.
Rule 11(a)(2), which allows conditional guilty pleas, is a
narrow exception to the ordinary rule that a defendant
who pleads guilty cannot appeal from his conviction or
challenge the sufficiency of the indictment on appeal.
United States v. Doherty, 17 F.3d 1056, 1058 (7th Cir. 1994).
A conditional plea must be in writing and “precisely
identify which pretrial issues the defendant wishes to
preserve for review.” United States v. Markling, 7 F.3d 1309,
1313 (7th Cir. 1993). Dimitrov’s “conditional plea” as
memorialized in the agreed statement of facts identifies
and preserves only his objection to the constitutionality of
the “mental state” required to sustain a violation of
§ 1960(a). Because Dimitrov neither objected to § 1960 as an
unconstitutional delegation of legislative power before
entering his plea nor specified that ground in his condi-
tional plea, he cannot raise it now on appeal. See Doherty,
No. 07-2759 15
17 F.3d at 1058-59 (“Doherty’s ‘conditional’ plea thus
necessarily reserved the right to appeal only the denial of
his motion to dismiss the indictment on the ground the
motion had stated.”).
III.
For the foregoing reasons, we A FFIRM Dimitrov’s con-
viction and sentence.
10-3-08