The opinion of the court was delivered by: I. LEO GLASSER
GLASSER, United States District Judge:
On March 26, 1991, this court denied defendant Shu Yan Eng's motion to suppress certain illegally seized financial records on the ground that the challenged evidence fell within the "inevitable discovery" exception to the exclusionary rule enunciated by the Supreme Court in Nix v. Williams, 467 U.S. 431, 81 L. Ed. 2d 377, 104 S. Ct. 2501 (1984). After conviction for tax evasion, defendant appealed this court's denial of his motion to the Second Circuit. In an order dated July 28, 1992, the court of appeals vacated the suppression ruling and remanded the case for "particularized findings" as to how discovery of "each piece of evidence challenged by Eng and claimed by the government to be admissible" "'would have been' more likely than not 'inevitable' absent the search of Eng's safe.'" United States v. Eng, 971 F.2d 854, 862 (2d Cir. 1992). Those "particularized findings" are provided, and this court reaffirms its initial conclusion that the majority of evidence challenged by defendant Eng fell within the parameters of Nix v. Williams and its progeny. Recognizing that the government failed to satisfy its burden of proof as to some of the evidence admitted at trial, this court nevertheless finds that the paucity of evidence incorrectly presented to the jury would not have changed the trial outcome and therefore constituted harmless error.
The Second Circuit opinion in this case, United States v. Eng, 971 F.2d 854 (2d Cir. 1992), sets forth the pertinent facts leading up to and following defendant's arrest and conviction, and familiarity with that decision is presumed. However, in order to memorialize the detailed exposition necessitated by the Second Circuit's vacatur and remand, this court includes in this opinion such other information as was relevant to its determination that the government ultimately would have discovered, by lawful means, the evidence challenged by Eng. In addition, where appropriate, inaccuracies and additions to the factual analysis reflected in the opinion of the court of appeals are included. The discussion and conclusions which follow rest on this court's observation of Agent Interdonato's demeanor, on an assessment of his testimony at the suppression hearing, and on a close examination of the transcript and exhibits from that hearing.
In conducting this tax evasion investigation of Shu Yan Eng, Interdonato used the "tax expenditures" method of proof, which essentially compares the taxpayer's income and non-taxable resources, such as gifts and loans, with the taxpayer's expenditures. Tr. at 3-4. In order to prove tax evasion by this indirect method, the government must show to a "reasonable probability" that non-taxable sources of funds spent by the taxpayer did not exist, a burden that involves a "thorough search of assets, sources of money, and cash inflows and outflows." Eng,, 971 F.2d at 856 (citing United States v. Bianco, 534 F.2d 501 (2d Cir.), cert. denied, 429 U.S. 822, 50 L. Ed. 2d 84, 97 S. Ct. 73 (1976)). The materials that Interdonato gathered in connection with the initial phase of his investigation are discussed in detail below.
On October 18, 1989, Eng was arrested pursuant to a grand jury indictment charging him with administration of a continuing criminal enterprise, money laundering, and various narcotics violations. Lawfully seized from Eng's person at the time of his arrest were American Express Cards, three vehicle registrations, a social security card, a life insurance card, a driver's license, and several business cards. Tr. at 177; GX 357. In addition, on the day of defendant's arrest, law enforcement authorities took possession of two of his business properties: the 26 Bowery building, mentioned above as the impetus for the tax investigation, and the French Ice Cream Parlor. A search of Eng's personal safe in the French Ice cream parlor ensued, and a variety of materials -- also discussed below -- were seized from that safe. The government concedes that the search and seizure of the safe were conducted without a warrant and were thus unlawful. Tr. at 184.
In April of 1990, approximately six months after the illegal search and eight months after Interdonato's tax evasion investigation commenced, a superseding indictment was handed up. That indictment added to the existing charges against Eng three tax evasion counts relating to the tax years 1986 through 1988. Eng then moved to suppress various financial documents seized in the search of the French Ice Cream Parlor safe and evidence allegedly derived from the seized materials, contending that this evidence was tainted by the illegal search and therefore could not be admitted at trial to support the tax evasion counts. After holding a suppression hearing, at which Agent Interdonato was the only witness, reading the parties' briefs and proposed findings of fact, and examining Nix v. Williams and its progeny, this court determined that the government had met its burden of proof under the "inevitable discovery" doctrine by demonstrating that it was more likely than not that the government would have discovered the challenged evidence even absent the illegal search. Defendant's motion to suppress was therefore denied, and, as expected, the government introduced many of the challenged documents into evidence at Eng's trial.
In April of 1991, a jury convicted Eng on all three tax evasion charges but acquitted him on all other counts. Eng thereafter appealed this court's suppression ruling to the Second Circuit which, as already mentioned, vacated the determination that the inevitable discovery doctrine applied generally to all the seized evidence and remanded the case for particularized findings of fact. The remainder of this opinion complies with that remand as follows: first, it discusses the relevant "inevitable discovery" law in the Second Circuit; second, it explains how the inevitable discovery doctrine relates to the particular investigation against Eng; third, it describes the evidence that the government presented at trial to support Eng's conviction on tax evasion; and fourth, it analyzes in detail each of the challenged pieces of evidence -- in accordance with the Second Circuit's mandate -- to explain why the majority of that evidence falls within the inevitable discovery exception to the exclusionary rule.
I. The Inevitable Discovery Doctrine
"The exclusionary rule prohibits introduction into evidence of tangible materials seized during an unlawful search, Weeks v. United States, 232 U.S. 383, 58 L. Ed. 652, 34 S. Ct. 341 (1914), and of testimony concerning knowledge acquired during an unlawful search, Silverman v. United States, 365 U.S. 505, 5 L. Ed. 2d 734, 81 S. Ct. 679 (1961)." Murray v. United States, 487 U.S. 533, 536, 101 L. Ed. 2d 472, 108 S. Ct. 2529 (1988). In the oft-quoted words of Wong Sun v. United States, 371 U.S. 471, 484-84, 9 L. Ed. 2d 441, 83 S. Ct. 407 (1963), the exclusionary rule also bars introduction of derivative evidence -- "fruit of the poisonous tree" -- unless the relationship between that evidence and the search is sufficiently attenuated:
We need not hold that all evidence is "fruit of the poisonous tree" simply because it would not have come to light but for the illegal actions of the police. Rather, the more apt question in such a case is "whether, granting establishment of the primary illegality, the evidence to which instant objection is made has been come at by exploitation of that illegality or instead by means sufficiently distinguishable to be purged of the primary taint." Maguire, Evidence of Guilt, 221 (1959).
Id. at 487-88. The rationale of the inevitable discovery doctrine evolved from this quotation. See Nix v. Williams, 467 U.S. 431, 441-43, 81 L. Ed. 2d 377, 104 S. Ct. 2501 (1984); see also United States v. Alvarez-Porras, 643 F.2d 54, 59 (2d Cir.) (citing language from Wong Sun and explaining that "in applying the exclusionary rule, a trial court must focus on the existence of 'exploitation' of the 'primary illegality.' 'The primary issue [is] whether the unlawful police behavior bore a causal relationship to the acquisition of the challenged testimony.' . . . Even if 'the challenged evidence was acquired by the police after some initial Fourth Amendment violation, . . . the question before the court is whether the chain of causation proceeding from the unlawful conduct has become so attenuated or has been interrupted by some intervening circumstance so as to remove the "taint" imposed upon that evidence by the original illegality.'") (citations omitted) (emphasis in original), cert. denied, 454 U.S. 839 (1981); United States v. Falley, 489 F.2d 33, 40-41 (2d Cir. 1973) (citing language from Wong Sun to hold "it would have been only a question of time before the government by a so-called saturation investigation, or otherwise, would have discovered the . . . documents. Even if the address book had shortened or facilitated the investigation it did not supply fruit sufficiently poisonous to be fatal.").
The inevitable discovery exception to the exclusionary rule allows admission of unlawfully obtained evidence at trial when the government demonstrates that discovery of that evidence by legitimate means was "inevitable." Nix, 467 U.S. at 444; United States v. Gorski, 852 F.2d 692, 695 (2d Cir. 1988). Illustration of what has been deemed "inevitable" is essential to comprehending and applying the doctrine. In the seminal Supreme Court case on inevitable discovery, Nix v. Williams, police officers elicited incriminating statements from the defendant which, in turn, led them to the body of his murder victim, a ten-year-old girl named Pamela Powers. Although an earlier Supreme Court appeal found the defendant's admissions to be the product of unconstitutional custodial interrogation, the Nix Court nevertheless held that evidence of the location and condition of the girl's body was properly admitted at defendant's retrial. Id. at 449-50. The basis for this holding was the Court's conclusion that police "inevitably" or "ultimately" would have discovered the victim's body even absent the unconstitutional conduct: a search had been in progress and was suspended only when defendant agreed to cooperate; the area was systematically divided or intended to be divided; and search-team members were three to five hours from the body's location when the search was suspended. Id. at 448-49.
The interest of society in deterring unlawful police conduct and the public interest in having juries receive all probative evidence of a crime are properly balanced by putting the police in the same, not a worse, position than they would have been in if no police error or misconduct had occurred.
Id. at 443-44 (emphasis in original). In other words, "the purpose of the inevitable discovery rule is to block setting aside convictions that would have been obtained without police misconduct." Id. at 443 n.4. Relying on the observation that "inevitable discovery involves no speculative elements but focuses on demonstrated historical facts capable of ready verification or impeachment," and declining "to impose added burdens on the already difficult task of proving guilt in criminal cases by enlarging the barrier to placing evidence of unquestioned truth before juries," the Nix Court rejected defendant's argument that the clear-and-convincing evidence standard was appropriate. Id. at 444-45 n.5. Rather, it held that the prosecution must establish inevitable discovery by a preponderance of the evidence in order for the exception to apply. Id. at 444.
B. Nix's Second Circuit Precursors and Progeny
Nix v. Williams was important in that it signalled acceptance of a widely recognized exception to the exclusionary rule, 467 U.S. at 440 n.2, but the opinion failed to define the precise contours of the inevitability doctrine. United States v. Cherry, 759 F.2d 1196, 1204 (5th Cir. 1985), cert. denied, 479 U.S. 1056, 93 L. Ed. 2d 983, 107 S. Ct. 932 (1987); United States v. Satterfield, 743 F.2d 827, 846 (11th Cir. 1984), cert. denied, 471 U.S. 1117, 86 L. Ed. 2d 262, 105 S. Ct. 2362 (1985). Recognizing the need to refine the meaning of "inevitable," many courts have looked not only to the Supreme Court case but also to consistent precedent from their circuits. See, e.g. United States v. Pimentel, 810 F.2d 366, 369 (2d Cir. 1987); Cherry, 759 F.2d at 1204; Satterfield, 743 F.2d at 846. Six inevitable discovery cases from the Second Circuit -- leading up to United States v. Eng -- help demonstrate the scope and nature of the inevitability doctrine in this circuit. Although none of these cases addresses the analysis appropriate to the particular type of action against Eng, they do illustrate the tenacity of the Nix Court's overriding concern: that in each case, a court must balance the exclusionary rule's deterrence rationale against an equally compelling public interest in having "juries receive all probative evidence of a crime" that was validly and constitutionally obtained. See Nix, 467 U.S. at 443-44; Murray, 487 U.S. at 539-41.
An examination of United States v. Alvarez-Porras, 643 F.2d 54, 59 (2d Cir.), cert. denied, 454 U.S. 839 (1981), a pre-Nix inevitable discovery case from this circuit, is an apt place to begin; although the facts of that case are quite distinct from those before this court, Alvarez-Porras discusses the inevitable discovery doctrine in depth and provides a terse and eloquent summary of relevant precedent from the Second Circuit. Defendants in Alvarez-Porras, convicted of conspiring to import and distribute substantial quantities of cocaine, challenged the seizure of incriminating evidence as unconstitutional because it occurred prior to the magistrate having signed the search warrant, although after the officers had applied for that warrant. Id. at 58-59. Thus, as in many of the later cases discussed below, Alvarez-Porras involved a search at a time when the issuance of a warrant was imminent.
The Second Circuit explained the three related exceptions to the exclusionary rule -- attenuation, independent source, and inevitable discovery -- as follows:
Each of these exceptions rests, most basically, on the lack of a sufficiently close connection between the state's wrongdoing and the invasion of the defendant's privacy. Furthermore, despite the identification of discrete headings for the various exceptions, their applications and rationales overlap enough that we view them more as helpful guides than as rigid tests. In each case, we must weigh the extent of any illegality, the probative value of any legally obtained information, and the relationship between the two, always with the hope of vigorously enforcing the Fourth Amendment without imposing ineffective constraints on criminal investigations.. . . In this complicated area, it is wise to let the cases speak for themselves and to encourage careful analysts and argument rather than to endorse vague headings which add little to our understanding of the problems and which, because of their symbolic impact, may lead inadvertently to a weakening of the Fourth Amendment's protection.
Id. at 60 (emphasis added). Reviewing and comparing the pertinent caselaw from the circuit,
id. at 60-63, the court cautioned that the precedent should not be read to invite speculation as to a search's probable results:
[Expansively interpreted, the cases above suggest] a broad inevitable-discovery exception whenever a court is satisfied that any government illegality was not the but-for cause of the discovery of any incriminating evidence. In many cases, dictum about a general but-for exception--based on the Supreme Court's phrase in Wong Sun v. United States, supra, 371 U.S. at 487, 83 S. Ct. at 417--will not change the result because the related, but separable, independent-source exception also applies. But the difference between the doctrines is crucial. The independent-source exception requires a showing that, even if the constable blundered once, he has taken enough proper steps that his lawful investigation is not thereby invalidated. A broad but-for exception, on the other hand, encourages speculation on whether a blunderbuss constable might eventually have developed a lawful basis for his investigation. A judge would have to conjecture about what the police would have done, or might have done, or could conceivably have done, in deciding whether illegal conduct which led to incriminating evidence was the but-for cause of the seizure. . . . At its furthest and most troubling extension, a but-for exception could be used to justify searches simply on the basis of probable cause and reasonableness, without regard for the warrant requirement, because the officers conducting the search were correct in believing they had a lawful basis for the search. . . . We will not risk the whittling down of the warrant requirement, without regard for compelling circumstances vel non, by justifying the admission of evidence under a broad inevitable discovery exception to the exclusionary rule.
Id. at 63-64. Nevertheless, the Alvarez-Porras court declined to suppress the challenged evidence in the case before it because "suppressing the evidence seized would not serve the deterrent purposes of the exclusionary rule." Id. at 65-66.
The next pre-Nix case that is useful in defining the reasoning and boundaries of the inevitable discovery doctrine is United States v. Fisher, 700 F.2d 780 (2d Cir. 1983). In that case, Howard Fisher, a convicted felon, purchased assorted handguns by posing as someone named Howard Ashe. After Fisher was convicted for violating the Federal Firearms Act, he appealed, claiming that admissions he made to Graham, a state investigator, were obtained in violation of his fifth amendment right against compelled self-incrimination. Noting that defendant's statements were never introduced into evidence at trial, the Second Circuit proceeded to analyze the effect that those statements had on the evidence that actually formed the basis for his conviction. Id. at 784. The factual link was as follows: Graham forwarded defendant's statements to Agent Varriale of the Federal Bureau of Alcohol Tobacco and Firearms (ATF), who was investigating whether there existed a "radical" source of guns used by criminals shooting police officers, id. at 782; based on defendant's statements, Varriale recalled an earlier report concerning a gun purchase by someone named Howard Ashe, id. at 784; the ATF agent thereupon initiated his own investigation of Fisher, id.; several days later, Fisher was again arrested for gun possession, this time at the New York/Canadian border. Id.
Citing United States v. Crews, 445 U.S. 463, 470, 63 L. Ed. 2d 537, 100 S. Ct. 1244 (1980), Alvarez-Porras, Falley, and Cole, the Second Circuit interpreted the facts of Fisher's case as follows:
Once Fisher had been arrested, the evidence against him was compiled in a routine fashion that would inevitably have led to Fisher's discovery. As Varriale had done in as many as a dozen other Vermont firearms investigations, he asked the major gun dealers in Vermont if they had recorded any purchases by Howard Fisher or Howard Ashe. He displayed a concededly appropriate photo spread to the three dealers with such records, two of whom quickly identified Fisher. Thus we agree with the district court which found that the evidence offered by the Government in support of Fisher's conviction was "derived from sources independent, in any event, from the statements made by the defendant to Graham," thereby removing Fisher's statements from the protection of the Fifth Amendment by way of the "inevitable discovery" exception to the exclusionary rule . . . . Because the discovery of Fisher's crimes was inevitable once he was arrested at the border with a gun purchased in Vermont, any assurance he received from Graham becomes irrelevant since it would not have saved Fisher from federal investigation.
Id. at 784 (emphasis added). Thus, in Fisher, as in earlier and subsequent cases from the Second Circuit, the routine nature of the investigation led the court to determine that illegal evidence inevitably would have been discovered. Cf. Falley, 489 F.2d at 41 ("If the evidence produced by the investigation was simply the normal output of that investigation, then the investigative findings have not been tainted directly.").
Following the Nix decision, the first case from this circuit to discuss the inevitable discovery doctrine was United States v. Pimentel, 810 F.2d 366 (2d Cir. 1987). Defendants in that case were indicted for falsifying and concealing material facts from, and making false and fraudulent statements to, the Department of Defense. In connection with this prosecution, the government sought to introduce into evidence two incriminating letters discovered in the course of a post-contract audit. Id. at 367. The district court found that the auditor had violated defendants' constitutional rights by removing these letters from defendants' files without their consent. Id. Recognizing the auditor's clear right to examine the letters in the course of his audit, id., the trial court nevertheless held that the inevitable discovery doctrine did not apply to direct but only to indirect products of an illegal search. Id. at 368.
The government appealed this ruling, and the Second Circuit reversed, concluding that the ongoing audit "surely would have uncovered the letters at issue," and that the Nix Court intended the inevitable discovery doctrine to apply to all products of a search, whether direct or indirect. Id. at 369. While recognizing that some of its sister courts had advanced a flexible test for inevitable discovery, the Pimentel court found that the facts of the case before it did not necessitate decision on this matter, stating:
Id. at 369. Instead, the Second Circuit examined whether admitting the letters in evidence would encourage fourth amendment abuse and determined, finally, that no such result would ensue. Id. (refusing to "'place an incommensurate burden on the government, unnecessary for the protection of commercial privacy'" that might "'invite seizure on the chance that it could arguably be converted into an effective vaccination against any future use of such routine records.'") (quoting McGarry v. United States, 388 F.2d 862, 871 (1st Cir. 1967).
The next post-Nix Second Circuit case to discuss inevitable discovery was United States v. Whitehorn, 829 F.2d 1225 (2d Cir. 1987), cert. denied, 487 U.S. 1237, 101 L. Ed. 2d 939, 108 S. Ct. 2907 (1988). In Whitehorn, three agents entered defendant's apartment upon just cause, arrested her, and conducted an initial security check of the location which uncovered nothing of evidentiary value. Id. at 1227-28. Two of those agents then took Whitehorn to the local FBI office where other officers were preparing an affidavit to obtain a search warrant of her apartment. Id. Concern that defendant had triggered an explosive device -- stemming from her organization's past terrorist activities -- led the officers who had departed from the apartment to request a bomb sweep; despite the supposed urgency of this situation, none of the neighbors were alerted to potential danger and the bomb expert did not arrive for 45 minutes. Id. at 1228. When the expert arrived, he and another officer "proceeded to look through every container and envelope" in the apartment, uncovering guns, timing mechanisms, equipment used to make false drivers' licenses and blank social security cards. Id. Any evidence of criminality observed during this search was then reported to the agents swearing out the search warrant. Id.
Defendant moved to suppress the evidence -- including her passport and driver's license -- discovered in this warrantless "bomb sweep." Id. at 1228-29. The government conceded the illegality of the search but cited the inevitable discovery doctrine as an excuse. Id. at 1229. In response, defendant acknowledged that all of the challenged evidence would have been discovered in the subsequent warranted search but argued that the search was tainted by the overbroad warrant. Id. The district court denied defendant's motion to suppress, id. at 1229-30, and the Second Circuit, after explaining the rationale of Nix v. Williams, affirmed as follows:
We . . . agree with Judge Conner that the requirement of the exception -- that the challenged evidence would inevitably have been discovered by lawful means -- was met. Agents at the F.B.I. office actually began the warrant application process over an hour before the illegal bomb sweep of Whitehorn's apartment occurred. They had already pinpointed the apartment to be searched. Through interviews with neighbors as well as prior extensive investigation, they knew that two of the apartment's occupants . . . had a history of trafficking in false identification documents, weapons, and explosives . . . . In short, the agents had overwhelming probable cause before the bomb sweep to search the apartment in the belief that it was being used, in Judge Conner's words, as a "safe house" for federal fugitives in which false identification documents and other types of information detected by the bomb sweep reasonably could be expected to be found. Under these circumstances, and given that the agents were then proceeding to secure a warrant which specifically authorized the seizure of the challenged evidence, we conclude that the district court properly denied Whitehorn's motion to suppress the evidence first detected by the bomb sweep.
Id. at 1231. Relying on this court's opinion in United States v. Levasseur, 620 F. Supp. 624 (E.D.N.Y. 1985), aff'd on other grounds, 816 F.2d 37 (2d Cir. 1987), the Whitehorn court rejected defendant's assertion that inclusion in the warrant affidavit of information from the sweep tainted the entire warrant and all evidence seized as a result of the warrant. Whitehorn, 829 F.2d at 1231 ("'It is well settled that "the ultimate inquiry is not whether the underlying affidavit contained allegations based on illegally obtained evidence, but whether, putting aside all tainted allegations, the independent and lawful information stated in the affidavit suffices to show probable cause."'") (quoting Levasseur, 620 F. Supp. at 631 n.2 (quoting United States v. Lace, 669 F.2d 46, 49 (2d Cir. 1982))).
A third case following Nix, United States v. Roberts, 852 F.2d 671 (2d Cir.), cert. denied, 488 U.S. 993, 102 L. Ed. 2d 583, 109 S. Ct. 556 (1988), posed the question of whether exceptions to the exclusionary rule apply to motions brought under Rule 41(e) of the Federal Rules of Criminal Procedure for return of property unlawfully seized. Id. at 675. In Roberts, law enforcement authorities seized an enormous quantity of business records pursuant to an overly broad search warrant that was not supported by probable cause. Id. at 672-73. The government argued that the inevitable discovery doctrine of Nix v. Williams was one of several exceptions to the exclusionary rule that applied to this illegal search. Id. at 675-76. More specifically, the government contended that it would have discovered the documents under a subpoena that it had issued several months prior to the search. The Second Circuit held that exclusionary rule exceptions do apply to Rule 41(e) motions but disagreed with the government's application of the inevitable discovery doctrine to this case:
The mere fact that the government serves a subpoena . . . does not mean that it will obtain the documents it requests. A subpoena can be invalid for a variety of reasons, as when it is unduly burdensome, Fed. R. Crim. P. 17(c), when it violates the right against self-incrimination, United States v. Doe, 465 U.S. 605, 610-12, 104 S. Ct. 1237, 1241-42, 79 L. Ed. 2d 552 (1984), or when it calls for privileged documents. In re Grand Jury Subpoena Dated Sept. 15, 1983, 731 F.2d 1032, 1036-37 (2d Cir. 1984). Moreover, we can deplore but not ignore the possibility that the recipient of a subpoena may falsely claim to have lost or destroyed the documents called for, or may even deliberately conceal or destroy them after service of the subpoena.
Id. at 676. The Roberts court therefore concluded that the government had not demonstrated by a preponderance of the evidence that its subpoena inevitably would have resulted in discovery of the challenged documents. Id.
United States v. Gorski, 852 F.2d 692 (2d Cir. 1988), was the first of several cases in this circuit to discuss the inevitable discovery doctrine in the context of an inventory search. Based upon confidential information and after a period of surveillance, FBI agents arrested defendant Gorski and searched the bag that he was carrying. Although the agents had probable cause to believe that the bag contained narcotics, they had neither a warrant nor exigent circumstances to justify their immediate search. Defendant moved to suppress the cocaine discovered in the bag, and the district court denied that motion based on its conclusion that an inventory search at the station inevitably would have revealed the evidence that was subject to suppression. Id. at 695. The Second Circuit reversed and remanded as follows:
The finding that [the] search of the bag at the FBI office would inevitably have led to the discovery of the cocaine is clearly correct. However, there was no evidence to support the further necessary finding that it was inevitable that such an inventory search would be conducted. A thorough review of the record reveals no evidence that such searches were an invariable, routine procedure in the booking and detention of a suspect at the particular FBI office involved. . . . We therefore have no alternative but to reverse the district court's order denying Gorski's motion to suppress the evidence found in the search of the bag and to remand for an evidentiary hearing on the factual issue whether an inventory search of the bag was a routine procedure incident to booking and detention of a suspect at the FBI office in question.
Id. at 696 (emphasis added); see also United States v. Jenkins, 876 F.2d 1085, 1088-89 (2d Cir. 1989) ("Assuming that the government could have taken custody of defendant's suitcase and transported it to FBI headquarters, . . . an inventory search, conducted by government agents pursuant to FBI policy, may have been permissible. And this search, in turn, may have satisfied the requirements of the inevitable discovery doctrine However, . . . before an inventory search is permissible, the government must have legitimate custody of the property to be inventoried . . . . Here the government has not yet shown any legitimate custody."), cert. denied, U.S. , 112 S. Ct. 659, 116 L. Ed. 2d 751 (1991).
Several observations emerge from this series of Second Circuit inevitable discovery cases. First, while courts are concerned that the inevitable discovery exception not erode the exclusionary rule, they also are reluctant to invalidate legitimate law enforcement activities because some tainted technique intrudes on an otherwise valid investigation. To strike a balance between these competing concerns, courts tend to ask whether the case before them is one in which excluding the challenged evidence would serve the deterrent purpose of the exclusionary rule. Second and related, the inevitable discovery doctrine, although unquestionably subjective to some degree, Eng, 971 F.2d at 861, requires avoidance of speculation to the extent possible. Consequently, the doctrine is most willingly applied in two types of cases: first and more commonly, when a valid search is imminent -- in other words, officers are in the process of obtaining a warrant; second, when the investigation is one that has routine, established procedures that the officer was in the course of following. As the next section demonstrates, United States v. Eng, 971 F.2d 854 (2d Cir. 1992), confirms these two observations; however, that case calls upon this court to explain how these observations were properly extended and applied to the particular tax expenditures investigation in question.
C. The Shin Yan Eng Remand
In considering the facts of defendant Eng's case, the Second Circuit refined its interpretation of the inevitable discovery doctrine by clarifying the teaching of Nix and its progeny in two important ways. First, the Eng court explained that Roberts, "contrary to Eng's contention," did not hold that
the subpoena power never may be relied upon by the government to meet the inevitable discovery burden of proof. . . . The per se prohibition urged by Eng would conflict with the Supreme Court's requirement that the exclusionary rule, and the inevitable discovery exception, should not be employed so as to place the government in a worse position than it would have been in had no unlawful search existed.
Id. at 860 (emphasis in original). Cautioning against "hypothesized 'leapfrogging' from one subpoena recipient to the next," the court held that "where the government can demonstrate a substantial and convincing basis for believing that the requisite information would have been obtained by subpoena there is no reason why the government may not rely upon the subpoena power as one way it might meet the burden of proving inevitable discovery by a preponderance of the evidence." Id.
Second, the Eng court voiced agreement with the Fifth Circuit's observation that "the alternate means of obtaining the evidence must at least be in existence and, at least to some degree, imminent, if yet unrealized.'" Id. at 861 (quoting Cherry, 759 F.2d at 1205 n.10 (5th Cir. 1985)). Summarizing the Second Circuit inevitable discovery cases, the Eng court observed:
Id. at 859 (emphasis added). The Eng court did not consider how this observation affects a case which, as a matter of law, requires the government to penetrate defendant's camouflaged financial activity in excruciating detail. Therefore, before specifically applying the inevitable discovery doctrine to each item of evidence admitted at Eng's trial, it is worthwhile to explain how the theory advanced in this case fits within the spectrum of inevitable discovery cases described above.
As the Second Circuit acknowledged, the government operates under significant constraints when it attempts to prove a tax evasion case by the expenditures method. Eng, 971 F.2d at 856. This method requires the government to amass detailed information concerning all of an accused's expenditures and to conduct a methodical, routine examination of those expenditures together with any available resources. For example, in United States v. Mastropieri, 685 F.2d 776 (2d Cir.), cert. denied, 459 U.S. 945 (1982), a net worth and expenditures case,
defendants challenged the government's tax investigation as insufficient. The government determined defendants' financial position by examining 32 separate bank accounts used by defendants; by canvassing 47 banks, 71 brokerage firms, and 13 lending institutions in the vicinity of defendants' residences; by searching property records in Bronx, Nassau, Queens, Kings and Suffolk Counties; by checking IRS, treasury department and county clerk records; and by interviewing various friends and acquaintances of the defendants. Id. at 779. Disagreeing with defendants' claim of insufficiency, the court explained:
The Government does enough when, as here, it investigates reasonably possible sources of non-taxable income and explores whatever leads the taxpayers or others may proffer. Once it has thus established a prima facie case, the taxpayer "remains quiet at his peril."
Id. at 785 (quoting Holland v. United States, 348 U.S. 121, 139, 99 L. Ed. 150, 75 S. Ct. 127 (1954)); see also United States v. Koskerides, 877 F.2d 1129, 1138 (2d Cir. 1989) (quoting Mastropieri and holding that government meets its burden of proof in tax evasion case when it "investigates reasonably possible sources of non-taxable income and explores whatever leads the taxpayers or others may proffer"); United States v. Caswell, 825 F.2d 1228, 1231 (8th Cir. 1987) ("Under the 'cash expenditures' method of proof, the government is required to show either a 'likely source' of the allegedly unreported income or that it has negated all reasonably possible nontaxable sources of income."). From these cases, it is clear that the government's burden of proof in establishing a prima facie case of tax evasion using the expenditures method is a heavy one.
Time consuming -- often extending over many months -- an expenditures investigation generally does not have one crucial event establishing criminality; it is the accumulation of evidence of the absence of legitimate sources of income which would normally permit large expenditures that establishes the criminal activity. See, e.g., Bianco, 534 F.2d at 504-06 (finding government's investigation sufficiently thorough so as to negate existence of non-taxable funds and uninvestigated leads when investigation included examining probate records and circulating letters to approximately 100 banks, a brokerage house, insurance brokers, doctors, schools, hospitals, the telephone company, the electric company, and an attorney who had performed legal services for defendant); see also Caswell, 825 F.2d at 1233 ("extensive investigation of bank records, prior years' tax returns, and the like reveal[ing] no other possible nontaxable sources of income, other than a cash gift . . sufficient . . . to allow the jury to infer that there were no other possible sources of income to explain [the defendant's] expenditures"); United States v. Terrell, 754 F.2d 1139, 1144-48 (5th Cir.) (in prosecution for tax evasion using "net worth" and "cash-on-hand/expenditures" methods of proof, government satisfied burden of negating non-taxable sources of funds by canvassing public records to determine defendant's holdings, contacting nearly 30 banks, interviewing nearly 300 potential witnesses, questioning third parties involved in transactions with defendant, and tracing all expenditures made by defendant back to their sources to determine how they were purchased), cert. denied, 472 U.S. 1029, 87 L. Ed. 2d 635, 105 S. Ct. 3505 (1985).
Accordingly, when a search occurs in the initial stages of an investigation that necessarily is of such complexity and duration, routine procedures such as those mentioned in Gorski and Fisher assume heightened significance in determining what would have happened in the absence of an illegal search. Cf. Cole, 463 F.2d at 174 ("It would be a poor 'saturation investigation' that did not embrace this common method of tax evasion; indeed, one would suppose [that charges for personal expenses] would be among the first items even in an ordinary field audit."). Clearly, obtaining business records, for example, is a recognized investigatory technique in such an investigation. See McGarry v. United States, 388 F.2d 862, 867 (1st Cir. 1967) ("To know that records relevant to the status of a business include ledgers, journals, cancelled checks, bank statements, vouchers, corporate minute books, cash receipts and disbursement records, deposit slips . . . is hardly today an occult art. An apprentice investigator would ask for such records."), cert. denied, 394 U.S. 921, 22 L. Ed. 2d 455, 89 S. Ct. 1178 (1969).
Bearing these principles in mind, this court turns to its assigned task: memorializing in detail its determination that the evidence in this case demonstrated that an active and ongoing investigation of Eng's tax violations was in progress at the time of the unlawful search; and then memorializing in detail why it concluded that each piece of evidence challenged by Eng and claimed by the government to be admissible inevitably would have been discovered absent the search of the French Ice Cream Parlor safe. Id. at 862.
III. Inevitable Discovery Applied
The government's theory of tax evasion at trial was that Eng used money upon which he did not pay taxes to make certain expenditures and acquire certain assets by dealing primarily in money orders. As evidence, the government introduced deposit items from bank accounts of individuals and businesses who received payments from Eng. Specifically, the evidence of Eng's tax evasion included the following:
1. Bank statements and records of defendant's personal bank accounts;
2. Documents relating to defendant's purchase of and mortgage on 134 Gauldy Avenue;
3. Documents relating to a condominium owned by defendant at 141 Division Street;
4. Documents relating to the purchase of a building at 26 Bowery;
5. Records relating to the National Westminster Bank account of Chinese Moon Restaurant, a business owned by defendant;
6. Records relating to cashier's checks deposited into, and wire transfers made to, the National Westminster Bank accounts of two of defendant's businesses, World Express and Chinese Moon;
7. Money orders used by Eng to pay the following expenses:
b. life insurance payments;
8. Documents relating to defendant's purchase of certain Florida property, specifically a boat and a condominium.
In the remainder of this opinion, this court examines the particular evidence within each of these categories, which led it to determine that the government "ultimately" or "inevitably" would have discovered the challenged evidence absent the illegal search of the French Ice Cream Parlor safe.
B. Active and Ongoing Tax Investigation
As an initial matter, this court found that the agents' illegal search of the French Ice Cream Parlor safe did not "trigger" or "catalyze" the tax evasion investigation of Eng. See Falley, 489 F.2d at 41. The original indictment, handed up on October 4, 1989, alleged that between September of 1982 and February of 1988 Shu Yan Eng engaged in a continuing criminal enterprise, as the principal administrator, and that as a result of a continuing series of narcotics violations, Eng derived substantial income and resources in violation of Section 848 of Title 21 of the United States Code. That indictment also accused Eng of conducting financial transactions involving the proceeds of this narcotics trade. There is no question that the narcotics and money laundering investigations were active at the time of the search.
Several pieces of evidence confirmed that the tax investigation of Eng was likewise active and ongoing at that time. First, as the Second Circuit recognized, it is "customary following commencement of narcotics and money laundering investigations [that] the IRS [begin] a tax evasion investigation" of the particular defendant. Eng, 971 F.2d at 856. Here, given that defendant was charged with importing and distributing more than 800 pounds of heroin and deriving substantial income from those activities, the government had substantial interest in and motivation to investigate his financial activities and to seek to forfeit the proceeds from the distribution of that heroin. That on October 18, 1989, the government had filed a complaint in rem which sought to seize and forfeit 26 Bowery as property acquired by drug transactions, corroborated this observation.
That the indictment was thereafter superseded to include tax counts did not negate the ongoing nature of the investigation in October of 1989. The government frequently investigates narcotics defendants' possession and expenditure of large sums of money in order to establish participation in narcotics trafficking. For example, in United States v. Briscoe, 896 F.2d 1476, 1499-1500 (7th Cir.), cert. denied, 498 U.S. 863 (1990), the Seventh Circuit responded as ...