Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.


January 28, 1982

In the Matter of the Application of SENTINEL GOVERNMENT SECURITIES and Sentinel Financial Instruments to Direct the Return of Seized Property

The opinion of the court was delivered by: HAIGHT


Movants Sentinel Government Securities ("SGS") and Sentinel Financial Instruments ("SFI") apply pursuant to Rule 41(e), F.R.Crim.P., *fn1" for an order directing the return of property seized under warrant. For the following reasons the motion is denied.

SGS and SFI are brokers and dealers in money market instruments and government securities. Certain aspects of their operations have attracted the interest of the Internal Revenue Service. SFI is presently the target of a grand jury inquiry into whether it has engaged in a widespread false trading operation, manufacturing documents so that customers could reduce their income tax liability by means of apparent "straddles." SGS is the target of an inquiry into comparable falsification of documents in order to provide tax losses to its limited partners. The grand jury investigations were triggered by information received from a confidential informant in a position to furnish the Government with detailed descriptions of the companies' activities. No indictments have as yet been voted.

 On November 17, 1981 a number of IRS agents executed search warrants issued by a magistrate of this Court and removed numerous files from the SFI and SGS offices at 100 Wall Street in Manhattan.

 SGS and SFI attack the search warrants as general warrants, violative of the Fourth Amendment as construed in such cases as Andresen v. Maryland, 427 U.S. 463, 480, 96 S. Ct. 2737, 2748, 49 L. Ed. 2d 627 (1976); Stanford v. Texas, 379 U.S. 476, 485, 85 S. Ct. 506, 511, 13 L. Ed. 2d 431 (1965), quoting Marron v. United States, 275 U.S. 192, 196, 48 S. Ct. 74, 76, 72 L. Ed. 231 (1927); Lo-Ji Sales, Inc. v. New York, 442 U.S. 319, 325, 99 S. Ct. 2319, 2324, 60 L. Ed. 2d 920 (1979); United States v. Abrams, 615 F.2d 541 (1st Cir. 1980); Application of Lafayette Academy, Inc., 610 F.2d 1 (1st Cir. 1979); United States v. Roche, 614 F.2d 6 (1st Cir. 1980); VonderAhe v. Howland, 508 F.2d 364, 369 (9th Cir. 1974) (per Leonard Moore, Ct. J., sitting by designation); and United States v. Marti, 421 F.2d 1263 (2d Cir. 1970), cert. denied, 404 U.S. 947, 92 S. Ct. 281, 30 L. Ed. 2d 264 (1971). The Government argues that its seizure of these quantities of business records, in execution of the warrants in the forms issued, is sanctioned by National City Trading Corp. v. United States, 635 F.2d 1020 (2d Cir. 1980), and United States v. Brien, 617 F.2d 299 (1st Cir.), cert. denied, 446 U.S. 919, 100 S. Ct. 1854, 64 L. Ed. 2d 273 (1980). Movants respond that these latter cases apply only where the activities of the entity whose documents are seized are entirely illicit, so that there is no basis for segregating between legitimate and illegitimate documentation, whereas in the case at bar, assuming arguendo illegal operations, there is also undisputed evidence of substantial legal operations by SGS and SFI, and the documents sought for use in the ongoing grand jury investigation are segregable from those documents that are not.

 Able briefs of counsel were filed on the original motion, and counsel have responded with equal skill to particular questions put by the Court in its memorandum opinion of January 5, 1982. Substantial questions arise which, in the event of an indictment, will require decision by the trial court within the context of a motion to suppress under Rule 12(b), F.R.Crim.P. But my reading of the Second Circuit's most recent authority considering Rule 41(e), Standard Drywall, Inc. v. United States, 668 F.2d 156 (2d Cir., 1982), persuades me that these issues need not and should not be reached at this time. *fn2"

 In Standard Drywall, federal agents executed a warrant to search the offices of that company, and seized various books and records for presentation to a grand jury that was investigating criminal violations allegedly committed by Standard Drywall and other companies in the construction industry. Prior to an indictment being voted upon, Standard Drywall filed a motion under Rule 41(e) for the return of all its property seized pursuant to the search warrant, alleging violation of Fourth Amendment protections. Judge Bramwell of the Eastern District of New York denied Standard Drywall's motion, relying on In re Grand Jury Proceedings Involving Berkley & Co., 466 F. Supp. 863, 866 (D.Minn.1979), for the proposition that Standard Drywall was required to demonstrate that it would suffer irreparable harm if the documents seized were not returned at once, and had failed to do so. In that connection, the Government offered to provide to Standard Drywall copies of all the documents seized from its offices. Judge Bramwell viewed this offer as undermining Standard Drywall's contention that it could not conduct business without these documents, thereby refuting any claim of irreparable harm. In these circumstances, Judge Bramwell reasoned (as paraphrased by the Second Circuit at 157) that the district court "need not balance any violation of Standard Drywall's Fourth Amendment rights against the need of the grand jury to consider all relevant evidence." Judge Bramwell postponed consideration of the merits of the Fourth Amendment claim "until such time as the initiation of a criminal proceeding necessitates such consideration in connection with a motion to suppress, brought under Rule 12(b)(3)," ibid.

 Standard Drywall sought to take an appeal from Judge Bramwell's order. The Second Circuit held that the order was not appealable. It reached that conclusion by construing Di Bella v. United States, 369 U.S. 121, 131-32, 82 S. Ct. 654, 660-61, 7 L. Ed. 2d 614 (1962), to limit appeals from orders denying pre-indictment Rule 41(e) relief to motions "for return of property brought by a movant with no connection to either an actual or potential criminal case, a person not suspected of anything who happened to have on his premises property pertinent to an investigation or prosecution of someone else," at 159. Because Standard Drywall did not fit within that category, the order denying its Rule 41(e) motion was not appealable.

 In view of the Second Circuit's jurisdictional holding in Standard Drywall, it did not reach the merits of Judge Bramwell's ruling that, at least in the context of a preindictment motion, the movant must demonstrate irreparable harm. I am, therefore, at liberty to agree with Judge Bramwell's rationale, as well as that of Chief Judge Devitt in Berkley & Co., supra, upon which Judge Bramwell relied. In point of fact, I do so agree, since I find persuasive the reasoning of Judge Devitt, fully expressed in Berkley at 466 F. Supp. at 866-67, and that of Judge Bramwell, as paraphrased by the Second Circuit in Standard Drywall. But the Second Circuit in Standard Drywall, addressing one aspect of the merits at least inferentially, observed with respect to the "irreparable harm" question at 157 n.2:

"We seriously question whether, in the absence of seizure of some unique property or privileged documents, a party could ever demonstrate irreparable harm when the Government either provides the party with copies of the items seized or returns the originals to the party and presents the copy to the jury."

 That footnote is pertinent to the case at bar because a comparable offer has been made by the Government to SGS and SFI, an offer which, the record indicates, has been at least partially implemented. It also appears from the record that although SFI and SGS understandably profess difficulties in doing so, the companies have in fact been able to continue doing business.

 The Second Circuit's language in Standard Drywall is also significant, in my judgment, because of the reasons assigned for non-appealability of pre-indictment Rule 41(e) motions. Judge Newman wrote:

"We think the cases that have dismissed appeals by those under investigation, even in the absence of a pending criminal prosecution, have correctly applied the principles of DiBella. Where, as here, the party moving for return of seized property is the subject of a grand jury inquiry, allowance of an appeal from denial of the motion would interfere with the grand jury proceedings, see United States v. Calandra, 414 U.S. 338, 349-50 (94 S. Ct. 613, 620-21, 38 L. Ed. 2d 561) (1974), and permit piecemeal appeals, see Cobbledick v. United States, 309 U.S. 323, 325 (60 S. Ct. 540, 541, 84 L. Ed. 783) (1940). Plainly this is not a case, of the sort contemplated in United States v. Ryan, 402 U.S. 530, 533 (91 S. Ct. 1580, 1582, 29 L. Ed. 2d 85) (1971), where denial of review "would mean that the Government might indefinitely retain the property without any opportunity for the movant to assert on appeal his right to possession.' The term of the grand jury is limited. If its inquiry results in indictment, the lawfulness of the seizure will be fully considered upon a motion to suppress, and any ruling adverse to the defendant will be reviewable upon appeal from a final judgment; if the grand jury declines to indict the movant, or adjourns without indicting it, its property will most likely be returned, and if not, it can initiate an independent proceeding for its return. Cf. Dickhart v. United States, 57 App. D.C. 5, 16 F.2d 345 (D.C.Cir.1926) (motion for return of seized property after search warrant quashed and defendant discharged)." at 158 (footnotes omitted).

 Just as allowance of an appeal from denial of a motion "would interfere with the grand jury proceedings," so would granting of the motion itself, a consideration stressed by Judge Devitt at the district court level in Berkley & Co., ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.