Former House Speaker Dennis Hastert, who served as Speaker when the Jack Abramoff scandal enveloped several members of the House of Representatives, was indicted today for allegedly structuring cash withdrawals and lying to the FBI about why he was making these withdrawals. The indictment can be found here.
According to the indictment, several years after Hastert left Congress, he met with an unnamed person (called Individual A) in 2010 to discuss “prior misconduct” by Hastert against Individual A. It appears that the conduct may relate to when Hastert was a teacher and coach in Yorkville, Illinois (1965-1981). Hastert allegedly agreed to pay $3.5 million to Individual A for both compensation for the prior misconduct and to conceal the misconduct.
By April 2012, Hastert had withdrawn $750,000 in fifteen withdrawals of $50,000 from three banks and allegedly gave those funds to Individual A. Because these withdrawals were for more than $10,000 in cash, the banks were required to file Currency Transaction Reports (“CTR”) with the government. In April, bank representatives “questioned [Hastert] about the $50,000 cash withdrawals that he had made.” The indictment contains very little regarding this conversation.
The indictment alleges that starting in July 2012, Hastert’s pattern of cash withdrawals changed. He now withdrew cash in amounts less than $10,000–at least 106 times through December 2014. The cash allegedly continued to go to Individual A, totaling $1.7 million through 2014.
In 2013, the FBI and IRS began to investigate Hastert for structuring his cash withdrawals to avoid the CTR requirement. It is likely that the FBI and IRS would have been tipped to this activity by a Suspicious Activity Report filed by Hastert’s banks in response to Hastert altering his withdrawal amounts after the banks questioned him about his large cash withdrawals.
In December 2014, the FBI interviewed Hastert and asked him why he was making the cash withdrawals. When the FBI asked if the withdrawals were because Hastert distrusted the financial system, Hastert allegedly replied, “Yeah…I kept the cash. That’s what I’m doing.” The government alleges that the real reason was to pay Individual A.
The government alleges both (1) structuring to avoid the CTR reporting requirement, and (2) lying to the FBI about why Hastert was making the withdrawals.
There are several lessons here. First, the FBI and IRS review SARs to investigate structuring; it is unclear how much Hastert’s public profile contributed to an investigation being opened. Second, the government is very skeptical when a person alters cash transactions from a level continuously above the CTR requirement to a level continuously below it–particularly if the change was after a discussion with the bank regarding the cash transactions. And third, the “Martha Stewart” charge (i.e., lying to the government) remains a strong tool that can be used by the government, including in structuring investigations.