Crime in the Suites: An Analyis of Current Issues in White Collar Defense
Archive for the ‘Federal Criminal Procedure’ Category
Feb 27
2015

SCOTUS Rules No Felony for Throwing the Little Ones Overboard

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This week, the United States Supreme Court resolved some fishy matters on which prosecutors sought to base a federal felony conviction.

The case, Yates v. United States, arose from a offshore inspection of a commercial fishing vessel in the Gulf of Mexico. During the inspection, a federal agent found that the ship’s catch contained undersized red grouper, in violation of federal conservation regulations. The agent instructed the ship’s captain, Mr. Yates, to keep the undersized fish segregated from the rest of the catch until the ship returned to port. But after the officer left, Yates instead told a crew member to throw the undersized fish overboard. Yates was subsequently charged with destroying, concealing and covering up undersized fish, in violation of Title 18, United States Code, section 1519. That section provides that a person may be fined or imprisoned for up to 20 years if he “knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence” a federal investigation.

At trial, Yates moved for a judgment of acquittal on this charge, noting that the provision was part of the Sarbanes-Oxley Act of 2002. That law was designed to protect investors and restore trust in financial markets after the collapse of Enron Corporation. Yates argued that the reference to “tangible object” was meant to refer to objects that store information, such as computer hard drives, and did not refer to fish. The Court denied the motion and the jury convicted Yates, and the Eleventh Circuit Court of Appeals affirmed the conviction, finding that fish are objects having physical form, and therefore fall within the dictionary definition of a “tangible object.”

In a majority opinion authored by Justice Ginsburg (and joined by the Chief Justice, Justice Breyer and Justice Sotomayor), the Court relied upon “[f]amiliar interpretive guides” in ruling that the “tangible object” to which section 1519 referred was indeed used to record or preserve information. In so ruling, the Court placed significant emphasis on context – in particular, the other parts of Title 18, Chapter 73. The Court noted Congress placed section 1519 at the end of that chapter immediately after pre-existing specialized provisions expressly aimed at corporate fraud and financial audits. The Court also noted the contemporaneous passage of section 1512(c)(1), which prohibits a person from “alter[ing], destroy[ing], mutilat[ing], or conceal[ing] a record, document or other object . . . with the intent to impair the object’s integrity or availability for use in an official proceeding” – a provision that would be unnecessary if section 1519’s reference to “tangible object” already included all physical objects. The Court also applied the statutory interpretation canons of noscitur a scoiis (“it is known from its associates”) and ejusdem generis(“of the same kind”), noting that beginning the provision with “any record [or] document” directs that the “tangible object” later referenced must be one used to record or preserve information. The Court also noted that the rule of lenity required that it resolve the dispute against finding criminal liability here. Justice Alito filed a concurring opinion relying on a narrower basis, while Justices Kagan, Scalia, Kennedy and Thomas dissented from the Court’s ruling.

The Court’s opinion in Yates makes for good reading for aficionados of classic statutory interpretation, and the Court’s decision to find that the scope of the statute was narrower than suggested by the government is a welcome respite from the seemingly ever-increasing scope of crimes in the U.S. Code. Congress could certainly pass legislation to make clear if it intended to include other tangible objects in the scope of this provision. But for now, tossing back the little ones does not constitute a SOX crime.

Feb 25
2015

Court Reins In Prosecutorial Overreach in Insider Trading Cases

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In an effort to reinstate powers stripped from them by the Court of Appeals in U.S. v. Newman and Chiasson, prosecutors have sought a rehearing of the landmark Second Circuit decision which severely curtailed the scope of insider trading cases.

The case is one which has already seen a dramatic reversal, so it is perhaps no surprise that prosecutors are hoping for the tide to turn in their favor.  In trial court, the jury heard evidence that financial analysts received insider information from sources at two companies, Dell and NVIDIA, disclosing the companies’ earnings before those numbers were publicly released.  The financial analysts in turn passed that information along to hedge fund traders Todd Newman and Anthony Chiasson, who executed trades in the companies’ stock.

Those transactions earned Newman’s funds approximately $4 million and Chiasson’s funds approximately $68 million. The prosecution charged both defendants with insider trading based on the trades they made with early knowledge of the earnings reports.  The trial judge instructed the jury that the defendants could be found guilty if they had knowledge that the information “was originally disclosed by the insider in violation of a duty of confidentiality.”  On December 12, 2012, the jury returned guilty verdicts for both defendants on all counts.

Newman and Chiasson appealed their convictions, arguing among other things that the prosecution had failed to present evidence that they had engaged in insider trading and that the trial judge improperly instructed the jury as to the level of knowledge required to sustain a conviction.  Newman and Chiasson argued that the government must prove beyond a reasonable doubt not only that the information was originally disclosed by the insider in violation of the duty of confidentiality, but that the insider disclosed the information in exchange for personal benefit.

The Court of Appeals agreed with their arguments, and found that the government had failed to present sufficient evidence that the insider received any personal benefit from sharing the information, or that Newman and Chiasson had knowledge of any such personal benefit an insider received from sharing the tip.

The Second Circuit’s December 10, 2014 opinion clearly lays out the requirements for “tippee liability,” that is, liability for one who received a tip originating from a corporate insider:

(1) The corporate insider was entrusted with a fiduciary duty; (2) the corporate insider breached the fiduciary duty by (a) disclosing confidential information to a tippee (b) in exchange for personal benefit; (3) the tippee knew of the tipper’s breach, that is, he know the information was confidential and divulged for personal benefit; and (4) the tippee still used that information to trade in a security or tip another individual for personal benefit.

Based on this standard, the Court of Appeals concluded that “without establishing that the tippee knows of the personal benefit received by the insider in exchange for the disclosure, the Government cannot meet its burden of showing that the tippee knew of a breach.”

The opinion also issued a stern rebuke of “recent insider trading prosecutions, which are increasingly targeted at remote tippees many levels removed from corporate insiders.”  This admonition could be fairly interpreted as being directed toward Manhattan United States Attorney Preet Bharara, who has been aggressively prosecuting Wall Street insider trading cases and has obtained approximated 85 convictions so far.  Mr. Bharara issued a statement saying that the decision “interprets the securities law in a way that will limit the ability to prosecute people who trade on leaked inside information.”

The court has yet to rule on the prosecution’s January 23, 2015 request for a rehearing of the case.  Until any modification is issued, the Newman ruling remains the controlling law of the Second Circuit and it will affect other cases.  Already, at least a dozen criminal defendants in the Southern District of New York have cited to the case in requesting to overturn their conviction or vacate their guilty pleas.

For instance, soon after the Second Circuit issued its ruling in Newman, a federal judge in Manhattan vacated the guilty pleas of four men charged with insider trading related to IBM:  Daryl Payton, Thomas Conradt, David Weishaus, and Trent Martin. Instead of bringing the case to trial, the prosecutors instead asked Judge Andrew Carter to dismiss the indictment.  However, the prosecutors indicated that if the Newman decision is altered on rehearing or appeal, they might consider bringing the charges again.  Appeals of previously convicted defendants will likely remain on hold pending the court’s decision on the requested Newman rehearing.  Regardless of the outcome on rehearing, the Newman decision is a strong indication that courts are making a concerted effort to rein in prosecutorial overreach.

Feb 18
2015

The Government’s [Subpoena] Power is Not Infinite

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It’s not every day that a federal court likens an Assistant U.S. Attorney’s argument to that “of a grade schooler seeking to avoid detention.” But, in a recent opinion, Judge Emmet G. Sullivan of the D.C. District Court did just that. In so doing, he reminded us that—despite the government’s (admitted) routine abuse of its subpoena power—the privacy rights of inmates matter, and a standard practice is not tantamount to a legal basis.

The overall case, one involving an alleged conspiracy to commit visa fraud, had taken some rare procedural twists before landing in Judge Sullivan’s courtroom: for example, the government had effectively incarcerated Ms. Truc Huynh (a former co-defendant) to postpone her deportation to Vietnam and ensure her availability to testify at a deposition against a remaining co-defendant. The primary issue addressed in Judge Sullivan’s recent ruling, however, was whether the U.S. Attorney’s Office violated the law when it issued subpoenas to the Central Treatment Facility (a local jail) for Ms. Huynh’s visitation logs, call logs, and recorded telephone calls—without notifying the Court, Ms. Huynh, or the defendant against whom Ms. Huynh was set to testify.

As a general matter, Rule 17 governs the issuance of subpoenas in criminal cases and allows the government to subpoena a witness to testify at a hearing or trial and may require the concurrent production of documents. It does not, however, allow for pretrial fishing expeditions for potentially relevant information. But that is precisely what the government had done in this case by “inviting” the jail to comply with the subpoena by promptly providing the requested documents directly to the Assistant U.S. Attorney handling the case. Within a matter of days, the jail complied with the production of 200 recordings, which were in Ms. Huynh’s native Vietnamese.

After having initially agreed to the defendants’ request for English language transcripts, the government later argued that compliance would be unduly burdensome because (upon review) the calls appeared to be irrelevant to the case. In so doing, the government showed its hand: the Assistant U.S. Attorneys had, essentially, used the Court’s subpoena power to conduct a fishing expedition into Ms. Huynh’s private phone calls without specific reason to believe that the calls would be admissible at trial.

To make matters worse, a similar subpoena had been issued for the remaining defendant’s jailhouse calls. When defense counsels moved to quash the subpoenas, the Assistant U.S. Attorneys failed to offer any legal authority in support of their actions—arguing instead that this was their general practice and they didn’t know of any authority saying they couldn’t. Fortunately for the defendants, Judge Sullivan—known for holding the government to account (see, e.g., his handling of the Ted Steven’s trial and the IRS scandal)—was not inclined to excuse such behavior. At oral argument, the Judge pushed back, “So that’s your authority: There’s nothing that says we can’t do it?” and the Assistant U.S. Attorney responded: “Right … That’s my authority.” The Court was not persuaded.

In his written opinion, Judge Sullivan held that the government had, indeed, overstepped Rule 17 by “inviting” the subpoena recipient to provide pretrial production of the documents requested. The government’s assertion—that an “invitation” for pretrial discovery did not obligate pretrial discovery—was of no moment, neither were its arguments that defendants lacked standing. Judge Sullivan made clear that “[b]ecause subpoenas are issued with the Court’s seal and backed by the threat of court-posed sanctions, the mere fact that an attorney abuses the subpoena power directly implicates the court itself and creates an embarrassment for the institution.”

In the end, Judge Sullivan boldly vindicated the privacy interests of these individual defendants. It remains to be seen, however, if his opinion will stymie the government’s practice of “inviting” pretrial discovery without court approval.  If nothing else, perhaps the Assistant U.S. Attorneys appearing before Judge Sullivan will think twice before doing so.

Dec 01
2014

Remote Search Warrants and the Continued Threat to Privacy Rights

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What were you doing Wednesday, November 5, 2014? If you are a staunch Republican, you might have been toasting the election results from the day before, dreamy-eyed and dancing. If you are a staunch Democrat, you might have been scratching your head profusely, thunderstruck and quiet. People across the country were talking politics and policy in a very public way that day. How would the results impact executive actions and legislative initiatives on immigration and healthcare? It seemed as though the democratic process was chugging along. Meanwhile, at the Thurgood Marshall Federal Judiciary Building in D.C., a little-publicized hearing with potentially far-reaching consequences to your privacy rights was taking place.

The hearing was before the Judicial Conference Advisory Committee on Criminal Rules. The topic for discussion was proposed rule changes to the Federal Rules of Criminal Procedure. The Justice Department had requested the regulatory body modify slightly Rule 41(b), which outlines the terms for obtaining a search warrant. So far so boring, right? And what does any of this have to do with you, a law-abiding citizen? No wonder that the hearing captured little attention. But the slight modification that the DoJ requested is nothing to yawn at. It is a rule change that would give federal investigators sweeping powers to access computers and electronic devices not only of their targets but also of anyone else whose online path crosses investigator initiatives. As civil liberties advocates have pointed out: the rule change could pose a serious threat to Fourth Amendment protections and privacy rights.

Last year, the DoJ requested Rule 41(b) be amended to permit courts to issue search warrants allowing remote access searches of computers and other electronic storage media when the location is concealed. The provision would further allow investigators to seize electronically stored information regardless of whether that information is stored within or outside the court’s jurisdiction. The request, especially when you consider how it would be carried out in practice, is a big leap from current procedure. As it currently stands, Rule 41(b) only allows (with limited exceptions) a court to issue a warrant for people or property within the court’s district. In order to keep a check on investigators and investigations, the rules impose this location limitation, among other limitations. The point is to not give investigators free reign to look in on whomever, wherever and whenever they choose; the point is to limit the impact their investigations could have on people’s right to privacy.

Courts and Congress have made it clear that to comply with the Fourth Amendment, a search warrant that involves surreptitious and invasive tactics must meet a number of rigorous safeguards. These safeguards were outlined in the 1960s when wiretapping and bugging developed as the investigative tools of choice. In 1967, the U.S. Supreme Court struck down New York state’s wiretapping law, holding that because electronic eavesdropping “by its very nature…involves an intrusion on privacy that is broad in scope,” it should be allowed only “under the most precise and discriminate circumstances.” Berger v. New York, 388 U.S. 41 (1967). The following year, Congress followed the Court’s cue and outlined those “precise and discriminate circumstances” in the Wiretap Act (a.k.a. Title III of the Omnibus Crime Control and Safe Streets Act of 1968). For a search warrant to be valid, the issuing judge must work through a number of questions to ensure the warrant will be sufficiently circumscribed to meet the Fourth Amendment’s particularity requirement and that it is based upon probable cause. These constraints help to ensure, among other things, that investigators don’t go on fishing expeditions in pursuit of a crime as well as a criminal or that investigators don’t otherwise misuse their ability to peer into the lives of individuals (say to badger someone with a different political affiliation).

Remote access searches of electronic devices are no less invasive than the forms of electronic eavesdropping envisaged in the Wiretap Act. As the Supreme Court recently pronounced in Riley v. California, the search of a modern electronic device such as a smartphone or computer is more intrusive to privacy than even “the most exhaustive search of a house.” 134 S. Ct. 2473, 2491 (2014). The proposed change to Rule 41 could short circuit the procedural safeguards in place and demand we carry out a fiction that somehow remote access searches are not a form of electronic eavesdropping demanding heightened standards (this would be a particularly challenging fiction if you consider that remote access searching could allow investigators to activate a device’s camera or microphone).

While the DoJ’s requested changes would not necessarily override requirements of the Wiretap Act, the Rule 41 amendments could facilitate statutory and constitutional violations. This concern, among a host of others, was well articulated by the American Civil Liberties Union in its comments on the rule change. (If you have the time, it is a worthwhile exercise to review the comments submitted by the ACLU and the Center for Democracy & Technology, among others that outlined the anticipated negative consequences of the proposed rule change.) Chief among the concerns are the risk that investigators’ techniques to gain remote access—such as hyperlinks on public pages (“watering holes”), where users with common interests tend to gather—could subject thousands of non-suspect individuals’ electronic devices to the government’s malware.

It remains to be seen what the Judicial Conference Advisory Committee will decide, whether they choose to rubberstamp the DoJ’s proposed amendments or whether they will stand down and submit the question to public and legislative debate. Considering the DoJ’s request raises significant constitutional questions, we can only hope the Committee recognizes the value of airing the matter before a more public forum where the system of checks and balances remains in place.

Nov 24
2014

Smart is the New Tough: A Changing Approach in America’s War on Drugs, Crime?

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Fact: the United States incarcerates its citizens at the highest rate in the developed world. Indeed—save one small chain of islands, whose entire population is just a fraction of our prison population—the United States’ incarceration rate is the highest on the planet.  And nearly half of our approximately 1.75 million inmates are serving time for nonviolent and/or drug-related offenses.

That is not OK. It is especially disgraceful in instances where poverty is the only factor standing between incarceration and freedom; nowhere is that connection more salient than in the realm of pretrial detention. It seems, however, there may be a light at the end of the tunnel: bail reform—federal and state.

The federal corrections policies—those that prevailed since the birth of the Nixon era’s War on Drugsare beginning to be dismantled. Of course, that’s hardly surprising, given Attorney General Holder’s unabashed stance on over-incarceration: “It’s clear – as we come together today – that too many Americans go to too many prisons for far too long, and for no truly good law enforcement reason.  It’s clear, at a basic level, that 20th-century criminal justice solutions are not adequate to overcome our 21st-century challenges.  And it is well past time to implement common sense changes that will foster safer communities from coast to coast.” But Holder is on his way out, and we cannot know whether his successor(s) will carry his torch forward.

As for the states, this election season a number of them put their approaches to victimless and/or nonviolent crime on the ballot. For example, voters in three states and 56 municipalities (including Washington, D.C.) had an opportunity to weigh in on how/where marijuana use fits into our society. The result: the majority of voters, across party lines, think it’s time for a change. Eight more states have proposed legalization ballot initiatives for 2016.

The decriminalization of low-level drug offences will, undoubtedly, have tangible effects on incarceration rates. But what of those arrested for the plethora of nonviolent—often victimless— crimes that remain on the books? At least one state is taking action…

In New Jersey—a state where just over 5,000 inmates (or 38.5% of the total jail population) are there simply because they are too poor to afford bail—the state legislature set out to address that problem with a companion bill aimed at reducing the prevalence of pre-trial detention.  With its first step, the NJ legislature passed a bill requiring that each defendant be evaluated to determine his/her propensity for recidivism during release, witness intimidation, and flight: low-risk, non-violent defendants shall be released on their own recognizance; those posing a higher-risk will be released subject to certain conditions (i.e., curfews, travel restrictions, and/or electronic monitoring); those posing the greatest risk may be denied bail; and all detained defendants will be entitled to a speedy trial protection. For its second, the legislature voted unanimously to poll the people—via ballot measure—on a constitutional amendment to allow judicial discretion in the pretrial detention of those most dangerous defendants. The Question: “Do you approve amending the Constitution to allow a court to order pretrial detention of a person in a criminal case?” The Answer: Yes. Now, with this tandem effort by lawmakers and voters, the bail reform package is in full effect.

For those whose concern for just policy overcomes the allure of partisan politics, state and local ballot initiatives can offer a keen lens into the hearts and minds of the populace. Although we are reluctant to read too much into the tealeaves (that has pitfalls all its own…), it seems—underneath the partisan gridlock—a sea change may be brewing. Whether this burgeoning trend will bear sustainable fruit—that remains to be seen. In the meantime, we will continue to be encouraged by small wins in the fight for an equitable justice system where socioeconomic status is not fate determinative. Stay tuned.

Nov 13
2014

Where to Draw the Line With Undercover FBI Operations

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Several news publications have been making much ado about a tactic the FBI used in 2007 to locate an individual suspected in a series of bomb-threats to Washington state high schools. The FBI created a fake news article, falsely representing it as an Associated Press publication, and sent a link to the suspect’s MySpace account. The article headline, which was directed at the suspect, was meant to entice him to go to the link. It worked. The suspect clicked on the link, which enabled the FBI to download malware on his computer and identify his location and Internet Protocol address. The suspect was subsequently arrested, charged and prosecuted in state court.

Newspapers and other media outlets have recently decried the FBI’s use of the AP’s name and brand recognition to further its purposes. The AP’s director of media relations noted in an October 2014 statement: “This ploy violated AP’s name and undermined AP’s credibility.” The Seattle Times complained that such action not only crosses the line, but erases it (the statement was made when the paper believed its publication was involved).  The controversy is somewhat understandable: journalists want to ensure their perceived independence; they don’t want to be seen as a tool of the powers that be.

But media concern over the FBI’s use of the AP name may be slightly overstated. The FBI did not publish the fake news article for broad dissemination. It directed the article to one suspect only. Nor is it exactly unprecedented for investigators to hold themselves out as something they are not in order to gain the trust of and nab wrongdoers. Should all cool teens (however they self-describe these days) complain that Narcs are undermining their reputation and street cred? Without these undercover operations, a major tool to FBI investigations would be lost, not to mention fodder for the popular television series that made Johnny Depp famous. FBI and other enforcement agencies regularly use deception to catch criminals. Everyone knows this, including the wrongdoers at whom deceptive practices are targeted.

Some argue that there is a colorable difference between impersonating a fake individual or persona and impersonating the press. If the impersonation were on a large scale and were relatively public, the deception would be problematic. People wouldn’t know what journalism was credible and what journalism wasn’t (not that this isn’t already a subject a some debate…).  But narrowly-focused operations directed exclusively at suspects who are the subject of a search warrant is a different scenario, and that’s the scenario that appears to be in play here. Where the FBI employs such tactics well enough into an investigation to support a search warrant, including having probable cause that the suspect is involved in criminal activity, using deception, which is an efficient way to locate the individual, doesn’t seem too alarming.

Of course, it is important to emphasize that legal process is everything. If the FBI were to disseminate fake news articles to gain computer access at the launch of an investigation, before it had a target, before it had probable cause, and before it had its actions approved judicially by a search warrant, such tactics would risk impacting innocent individuals and undermining news sources.

Jul 08
2014

The Right to Remain Silent Does Not Extend to Computer/Phone Passwords

Recently the Massachusetts Supreme Judicial Court ruled that under certain circumstances, a court may compel a criminal defendant to provide the password to encrypted digital evidence without violating the defendant’s constitutional rights. This is an increasingly prevalent issue that has divided courts across the country and may be presented to the United States Supreme Court for review soon.

Leon Gelfgatt was indicted in 2010 for allegedly operating a mortgage fraud scheme that fraudulently collected more than $13 million. During the investigation, Massachusetts state troopers seized four computers, all of which were protected by encryption software that Gelfgatt refused to remove. Lawyers for the Commonwealth of Massachusetts filed a motion in Superior Court asking the court to compel Gelfgatt to enter the password for his encryption software so that law enforcement could review the contents. The Superior Court denied the motion, stating that the Commonwealth was asking for the defendant’s assistance in accessing potentially incriminating evidence.

In a 5-2 ruling, the Massachusetts Supreme Court reversed the lower court ruling and held that police could compel Gelfgatt to decrypt his files, because he told investigators that the computer belonged to him and he had the encryption key. The majority opinion reasoned that Gelfgatt’s disclosure to investigators that he had the password to access the encrypted materials was sufficient to satisfy the “foregone conclusion” exception to the Fifth Amendment protection against self-incrimination. The court did not specify if Gelfgatt would have been compelled to decrypt the computers if he did not tell law enforcement that he owned the computers and had the ability to decrypt them, which may limit the reach of this opinion.

In a strong dissenting opinion, two justices found compelling a criminal defendant to decrypt the files is the functional equivalent to forced self-incrimination.

After the decision, one of Gelfgatt’s lawyers indicated that they planned to appeal the decision to the U.S. Supreme Court, which has not yet considered the issue that has divided jurisdictions across the country.  In 2012, the U.S. Court of Appeals for the Eleventh Circuit held that a man under criminal investigation could not be compelled to decrypt his computer hard drives for the government without a showing by the government of specific knowledge about the contents of the hard drive, an opinion referred to by the dissenting opinion in this case.

In a time when law enforcement is increasingly relying on digital evidence in building cases against criminal defendants, issues regarding encryption and password protected materials will continue to arise.  We hope the Supreme Court will grant an appeal and clarify that law enforcement cannot compel criminal defendants to decrypt files without violating the Fifth Amendment right against self-incrimination.

Jul 02
2014

U.S. Court of Appeals Decision: Cell Location Data is Protected Under Individual’s Expectation of Privacy

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The U.S. Court of Appeals for the Eleventh Circuit recently considered whether cell site location data is protected by the Fourth Amendment. On June 11, 2014, the court issued its decision in favor of privacy rights: the court held that cell site location information is within the cell phone subscriber’s reasonable expectation of privacy. If officers want the data, they must obtain the subscriber’s consent or a judicial warrant supported by probable cause.

The court’s decision in United States v. Davis pertained to Quartavius Davis, a federal defendant who was convicted in Florida on multiple counts of robbery, conspiracy, and possession of a firearm. For his crimes, Davis was sentenced to roughly 162 years in prison.

On appeal, Davis argued that his convictions and sentence should be reversed. Among other things, Davis argued that the trial court erred in denying his motion to suppress cell site location data, which the prosecution used to place Davis near the various crime scenes. Investigators were able to obtain the data without a probable-cause warrant. They did so under a provision of the Stored Communications Act, which states that a court may order production of non-content cell phone records based on reasonable grounds to believe the records are material to an ongoing criminal investigation. Davis objected that the evidence in his case should be suppressed because it was the product of a warrantless search conducted in violation of his constitutional rights.

The Eleventh Circuit agreed with Davis, holding that cell site location information is within the subscriber’s reasonable expectation of privacy. Speaking for the three-judge panel, Judge Sentelle discussed two distinct views of the interests subject to Fourth Amendment protection: property interests and privacy interests. The court determined that the privacy theory applied to Davis’ case. Because Davis had a reasonable expectation of privacy in his cell site location information, the government’s warrantless collection of that data violated Davis’ Fourth Amendment rights.

The Davis opinion is arguably the most protective of individual rights as compared to similar appellate decisions. In September 2010, the Third Circuit held that officers can obtain cell site data under the Stored Communications Act as long as they meet the reasonable-grounds standard. But the court also added that, in exceptional cases, a judge may impose a warrant requirement for data that can be used to track an individual’s movements in a private location, such as the home.

In July 2013, the Fifth Circuit issued a less-protective decision. In that case, the court held that individuals do not have a reasonable expectation of privacy in non-content cell site data. Therefore, the court must order the production of such information when the government meets its burden of proof under the Stored Communications Act.

The Supreme Court has yet to decide the issue. But past Fourth Amendment cases suggest that no fewer than five sitting Justices favor the privacy theory that Judge Sentelle relied on. They are likely to agree that cell phone subscribers have a reasonable expectation of privacy in their cell location data.

Jun 26
2014

Court: Police Need Warrant to Search Phone. But Guess What? They Get to Keep Your Phone While They Get One.

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Will cops still get access to cell phone data post arrest? You bet. Today’s Supreme Court decision just means they need to get permission from a judge before they start searching who you have been texting. And odds are very good, that permission will be granted.

In a unanimous decision authored by Chief Justice Roberts, the United States Supreme Court held that law enforcement officers may not conduct warrantlesssearches of cell phones that are seized incident to an arrest. But just because police cannot immediately search mobile phones, doesn’t mean they cannot immediately seize them in connection with an arrest. Indeed, the benefit of today’s decision by our country’s highest court may be limited to the two defendants who brought the case (and of course any similarly situated defendants).

The named defendant in Riley v California is David Riley. After Riley was stopped for a traffic violation, he was arrested and the police officer seized his cell phone incident to that arrest. When the officer accessed the data on the phone (without a search warrant), he noticed the repeated use of an identifier associated with the Bloods street gang. Later, a detective reviewed the cell phone records and noticed gang-related content, including a photo of Riley standing in front of a car that was used in a shooting weeks earlier. Riley was convicted of multiple crimes related to that shooting and received a sentence of 15 years to life.

The second case resolved today involved Brima Wurie, who had been arrested in connection with a drug sale. After Wurie’s arrest, police took him to the police station where officers confiscated his flip phone. A few minutes later, Wurie’s phone showed an incoming call from “my house.” The officers opened the phone, accessed the call log to determine the number of the incoming call, and then traced the number back to Wurie’s apartment, which they secured. After obtaining a search warrant, the officers searched the apartment and seized drugs, a gun, ammunition, and cash. At trial, Wurie was convicted on three drug-related counts and sentenced to more than twenty years in prison.

The key here to note is that in neither case did law enforcement obtain prior permission to search the cell phones belonging to Riley and Wurie. The narrow question presented to the Court therefore was whether it is permissible for law enforcement to search cell phone data incident to an arrest where no court has authorized such a search. In holding that such a search violates the Fourth Amendment of the US Constitution, the Court considered but rejected as not relevant prior cases where so-called “warrantless” searches passed constitutional muster. For example,

· In Chimel v. California, the Court recognized that the Fourth Amendment permits warrantless searches of the arrestee and areas within his immediate control if necessary to protect officer safety or to preserve evidence.

· In Arizona v. Gant, the Court held that officers may search a car incident to arrest if the arrestee is unsecured and within reaching distance of the passenger compartment or if the officer reasonably believes evidence of the crime of arrest may be found.

Because there were no such exigent circumstances present in Riley or Wurie’s arrest, the Court concluded that the need for cell phone data searches does not outweigh the corresponding intrusion on individual privacy, and thus a warrant was required. This of course is the right result. Digital cell phone data does not, by itself, of course, threaten officer safety. And a warrantless search of cell phone data is not necessary to preserve evidence. The Court recognized an individual’s privacy interest in digital cell phone data is considerable: cell phones have immense storage capacity, collect many types of records in one place, and often contain years’ worth of data.

In this regard, today’s decision is a victory for privacy rights. Law enforcement officers will not be permitted to conduct warrantless searches of cell phones for digital evidence. But if you are arrested, don’t assume law enforcement will let you keep your phone. Today’s decision may not allow for a warrantless search of your phone, but there is nothing prohibiting law enforcement from securing a phone post-arrest and seeking permission from a court to search it. And the chances that a court will grant such a request are close to 100%.

Apr 30
2014

Another SDNY Judge Finds the U.S. Sentencing Guidelines Wanting

In a sentencing hearing yesterday in the Southern District of New York, yet another judge reached the conclusion that the quasi-mathematical formulaic approach of the United States Sentencing Guidelines fails to account adequately for differences between criminal defendants.  But, in this case, the result was to the detriment of the individual being sentenced in that case.

Judge Jed Rakoff made headlines in October 2012 when he sentenced former Goldman Sachs director Rajat Gupta to a two-year prison sentence despite an advisory Guidelines range of 6-1/2 to 8 years (and an even higher range pressed by prosecutors and the Probation Department).  As we wrote here at that time, in ordering a significant downward variance, Judge Rakoff bemoaned the Guidelines’ attempt to treat human beings and their attendant complexities as “commodities,” and the “bizarre results” that follows that approach.

In yesterday’s sentencing hearing for Anatoly Golubchik, Judge Jesse Furman focused on a different manner in which the Guidelines fail to account for differences from case to case.  Golubchik had entered a guilty plea to a single count of participating in a racketeering conspiracy from in or about 2006 through in or about April 2013.  The government alleged that this racketeering conspiracy engaged in illegal gambling, threats of violence, and laundering of approximately $100 million.

Under Section 2E1.1 of the Guidelines (applicable to racketeering), Golubchik’s base offense level was the greater of 19 or the base offense level applicable to the underlying conduct.  That underlying conduct was the operation of an illegal gambling business, for which Section 2E3.1 provides a base offense level of 12.  Thus, Golubchik’s base offense level was 19, and, despite the laundering of millions of dollars, the Probation Department calculated the advisory Guidelines range as 21 to 27 months.

In its submission prior to sentencing, the government argued that the Court should grant an upward variance from that range based, in part, on the failure of the Guidelines to reflect adequately the extent of Golubchik’s offense.  The Court ultimately ordered the parties to be prepared to address at sentencing whether it should grant an upward departure under Section 5K2.0 on the ground that the offense conduct presented a circumstance of a kind or to a degree not adequately taken into consideration by the Guidelines.  The issue was joined, in large part, simply because the Guidelines applicable to illegal gambling – unlike the Guidelines applicable to many other offenses – do not include an upward enhancement based upon the amount of money involved according to the loss table set forth in Section 2B1.1 of the Guidelines.  (The Guideline applicable to money laundering (Section 2S1.1) directs the application of the offense level for the underlying conduct if that level can be determined; otherwise, it would incorporate an enhancement from the loss table.)

During argument on this issue, Judge Furman pushed Golubchik’s counsel to “concede that two defendants, one convicted of racketeering offenses involving gambling amounting to $2,000 and two, a defendant convicted of racketeering offenses [involving] gambling involving $100 million” are treated the same under the Guidelines.  Transcript of April 29, 2014 Hearing at 56.After hearing the parties’ argument, Judge Furman ordered an upward departure on that basis:

I do believe and find that a departure is warranted under Section 5K2.0, whether the problem is with the gambling guideline, namely 2E3.1, or the money laundering guideline, namely 2S1.1, by de-linking completely the offense conduct from the amount of money involved with the direct money laundering, the guidelines failed to distinguish, in my view, between run-of-the-mill gambling cases and run-of-the-mill racketeering cases involving gambling, and cases like this one involving a massive, sophisticated gambling operation that spans continents and involves upwards of $100 million.

Id. at 61.  In addition to noting the failure of the gambling Guideline to consider the amount of money involved, Judge Furman noted the “anomaly created by the fact that for third-party launders the loss table is used to calculate the guidelines range.”  Id.  Based in large part on this issue, Judge Furman sentenced Golubchik to 60 months in prison – a sentence more than double the top of the advisory Guidelines range.

Our purpose in commenting on this hearing is not to criticize Judge Furman’s ultimate decision in sentencing Golubchik.  Rather, we do so because Judge Furman’s identification of the “anomaly” created by the gambling and money laundering Guideline sections presents yet another manner in which the Guidelines simply fail to deliver on their promise to provide a mathematical formula for determining a sentence consistent with the mandate in Title 18, United States Code section 3553.  Of course, one solution would be simply to tie those Guideline sections to the loss table.  But given the growing – and, in our view, well-deserved – criticism of the application of the loss table in the Guidelines, this would simply make matters even worse.  We instead view the analytical conflict identified by Judge Furman as yet another factor that should ultimately lead to the demise of the Guidelines as a useful tool for federal sentencing.

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About Ifrah Law

Crime in the Suites is authored by the Ifrah Law Firm, a Washington DC-based law firm specializing in the defense of government investigations and litigation. Our client base spans many regulated industries, particularly e-business, e-commerce, government contracts, gaming and healthcare.

Ifrah Law focuses on federal criminal defense, government contract defense and procurement, healthcare, and financial services litigation and fraud defense. Further, the firm's E-Commerce attorneys and internet marketing attorneys are leaders in internet advertising, data privacy, online fraud and abuse law, iGaming law.

The commentary and cases included in this blog are contributed by founding partner Jeff Ifrah, partners Michelle Cohen, David Deitch, and associates Rachel Hirsch, Jeff Hamlin, Steven Eichorn, Sarah Coffey, Nicole Kardell, Casselle Smith, and Griffin Finan. These posts are edited by Jeff Ifrah. We look forward to hearing your thoughts and comments!

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