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UNITED STATES v. GEL SPICE CO.

January 28, 1985

UNITED STATES OF AMERICA, against GEL SPICE CO., INC., BARRY ENGEL AND ANDRE S. ENGEL, Defendants


The opinion of the court was delivered by: MCLAUGHLIN

MEMORANDUM AND ORDER

JOSEPH M. MCLAUGHLIN, U.S.D.J.

The defendant corporation, its president, Barry Engel, and its vice-president, Andre Engel, are charged in a ten-count Information alleging, in substance, that the defendants permitted food to become adulterated within the meaning of §§ 342(a)(3) and 342(a)(4) of the Food, Drug and Cosmetic Act (the "Act"), 21 U.S.C. § 301 et seq. Defendants made several motions to suppress evidence and to dismiss certain counts of the Information. United States Magistrate A. Simon Chrein of this Court denied those motions, and defendants have appealed. 28 U.S.C. § 636(b). This Memorandum and Order embodies ruling made orally on October 21, 1983.Facts

 Gel Spice, Inc., has been the subject of regular inspections by the Food and Drug Administration (FDA) since 1972. In July 1976, March-April 1977, and July 1977, FDA inspectors conducted three extensive inspections of the Gel Spice warehouse in Brooklyn, New York. On those occasions photographs were taken and certain lots of allegedly adulterated foods were seized.

 Three hearings were subsequently held pursuant to § 305 of the Act, 21 U.S.C. § 335. Section 305 hearings afford a person against whom the FDA is contemplating a criminal prosecution "appropriate notice and an opportunity to present his views, either orally or in writing, with regard to such contemplated proceeding" before the matter is referred to the United States Attorney for prosecution. Id.

 The first § 305 hearing was held on October 27, 1976 following the July 1976 inspection, and the second on December 20, 1977 following the March-April and July 1977 inspections. On September 18, 1978, the FDA Chief Counsel formally referred a request for prosecution of Gel Spice to the Office of the United States Attorney in the United States Department of Justice.

 In January 1979, the FDA conducted another inspection, which disclosed an active rodent infestation on the Gel Spice premises. Another § 305 hearing was held on May 30, 1979; and this Information was filed in December 1980.Discussion

 1. FDA's Good Faith

 Defendants' first motion is to dismiss the Information or to suppress evidence on the ground that the government obtained the evidence in bad faith; that is, that the government conducted the searches, not in furtherance of administrative purposes, but rather to obtain evidence for a criminal prosecution that was already planned. Defendants contend that they are entitled to an evidentiary hearing at least on the issue of the government's good faith.

 A regulatory agency may investigate possible violations of law through its administrative process, provided that its inquiries are for a proper purpose, the information sought is relevant to that purpose, and the statutory procedures are observed. United States v. Powell, 379 U.S. 48, 57-58, 13 L. Ed. 2d 112, 85 S. Ct. 248 (1964). Once the agency has established the existence of a valid civil purpose, the burden shifts to the defendants to come forward with evidence of bad faith. See United States v. O'Henry Film Works, 598 F.2d 313, 320 (2d Cir. 1979); United States v. Morgan Guaranty Trust Co., 572 F.2d 36, 42-43 n.9 (2d Cir.), cert. denied, 439 U.S. 822, 99 S. Ct. 89, 58 L. Ed. 2d 114 (1978). Magistrate Chrein held (Interim Report and Recommendation at 11-12), and I agree, that the burden is on the defendants in this case "to disprove the actual existence of a valid . . . purpose . . ." United States v. LeSalle National Bank, 437 U.S. 298, 316, 98 S. Ct. 2357, 57 L. Ed. 2d 221 (1978).

 Before obtaining evidentiary hearing on the issue of the government's good faith, defendants must make a substantial preliminary showing of bad faith. United States v. O'Henry's Film Works, supra, 598 F.2d at 320; United States v. Morgan Guaranty Trust Co., supra, 572 F.2d at 42-43 n.9; United States v. Morgan Guaranty Trust Co., 524 F. Supp. 24, 27 (S.D.N.Y. 1981). To establish bad faith, defendants must show that the sole purpose of the investigation was investigatory, rather than regulatory. United States v. LaSalle National Bank, supra, 437 U.S. at 316-17; Securities and Exchange Commission v. Dresser Industries, Inc., 202 U.S. App. D.C. 345, 628 F.2d 1368, 1387 (D.C.Cir.)(en banc), cert. denied, 449 U.S. 993, 66 L. Ed. 2d 289, 101 S. Ct. 529 (1980); United States v. Schutterle, 586 F.2d 1201, 1203 (8th Cir. 1978).

 I agree with the Magistrate Chrein that the FDA conducted its investigation pursuant to a valid administrative scheme and not for the purpose of gathering evidence (Final Report and Recommendation at 2-3). Magistrate Chrein further found that the government made its decision on September 18, 1978, to prosecute defendants for the violations discovered at the July 1976, March-April 1977, and July 1977 inspections. The decision to prosecute defendants for the January 1979 violations was made on November 21, 1979. Id. These findings, which I adopt, undermine defendants' contention that the FDA inspections were "for an investigatory rather than regulatory purpose." United States v. Shaefer, Michael and Clairton Slag, Inc., 637 F.2d 200, 204 (3d Cir. 1980).

 An evidentiary hearing is not required without a meaningful factual showing of an improper purpose by the agency. Securities and Exchange Commission v. Howatt, 525 F.2d 226, 229 (1st Cir. 1975). I am satisfied that the defendants have made no such showing in this case. Accordingly, defendants' motion for dismissal, ...


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