[1]     

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

, [5]     

Argued: August 31, 1995

, [6]      IN RE: THE SEIZURE OF ALL FUNDS IN ACCOUNTS IN THE NAMES REGISTRY PUBLISHING, INC., STERLING WHO'S WHO, INC., WHO'S WHO OF RETAILERS, INC., WILLIAM'S WHO'S WHO, INC., WHO'S WHO EXECUTIVE CLUB, BRUCE GORDON, WHO'S WHO WORLDWIDE REGISTRY, INC., PUBLISHING VENTURES, INC., INCLUDING BUT NOT LIMITED TO MARINE MIDLAND BANK ACCOUNT NOS. 018-78090-3, 018-78047-4, 018-78044-0, 018-78055-5, 018-78153-5, 018-78173-0, STERLING NATIONAL BANK & TRUST COMPANY OF NEW YORK ACCOUNT NOS. 035-79716-07, 031-43410-01, 031-43402-01, REPUBLIC NATIONAL BANK FOR SAVINGS ACCOUNT NO. 2601001775, AND ALL FUNDS TRACEABLE THERETO. " />

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In Re Seizure of All Funds, 68 F.3D 577 (2d Cir. 10/17/1995)

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

No. 474 -- August Term, 1995

Docket No. 95-6119

68 F.3d 577, 1995.C02.0000471 <http://www.versuslaw.com>

Argued: August 31, 1995

IN RE: THE SEIZURE OF ALL FUNDS IN ACCOUNTS IN THE NAMES REGISTRY PUBLISHING, INC., STERLING WHO'S WHO, INC., WHO'S WHO OF RETAILERS, INC., WILLIAM'S WHO'S WHO, INC., WHO'S WHO EXECUTIVE CLUB, BRUCE GORDON, WHO'S WHO WORLDWIDE REGISTRY, INC., PUBLISHING VENTURES, INC., INCLUDING BUT NOT LIMITED TO MARINE MIDLAND BANK ACCOUNT NOS. 018-78090-3, 018-78047-4, 018-78044-0, 018-78055-5, 018-78153-5, 018-78173-0, STERLING NATIONAL BANK & TRUST COMPANY OF NEW YORK ACCOUNT NOS. 035-79716-07, 031-43410-01, 031-43402-01, REPUBLIC NATIONAL BANK FOR SAVINGS ACCOUNT NO. 2601001775, AND ALL FUNDS TRACEABLE THERETO.

Before: MINER and CALABRESI, Circuit Judges, and POLLACK, Senior District Judge.*fn*

[8]    

Decided: October 17, 1995

[9]    

BRUCE GORDON, WHO'S WHO WORLDWIDE REGISTRY, INC., STERLING WHO'S WHO, INC., REGISTRY PUBLISHING, INC., WILLIAM'S WHO'S WHO, INC., WHO'S WHO EXECUTIVE CLUB, PUBLISHING VENTURES, INC., WHO'S WHO OF RETAILERS, INC.,

Petitioners-Appellees, v.

UNITED STATES OF AMERICA,

Respondent-Appellant.

Appeal from an order entered in the United States District Court for the Eastern District of New York (Spatt, J.) vacating a seizure warrant and ordering the release of funds seized, the district court having found that the government failed to demonstrate probable cause to believe that petitioners-appellees committed mail or wire fraud in violation of 18 U.S.C. Section(s) 1341 and 1343.

Vacated and remanded for further findings and reconsideration in light of new evidence.

BARBARA UNDERWOOD, Assistant United States Attorney, Brooklyn, NY (Zachary W. Carter, United States Attorney for the Eastern District of New York, Deborah B. Zwany, Sarah J. Lum, Gary R. Brown, Assistant United States Attorneys, Brooklyn, NY, of counsel) for Respondent-Appellant.

VIVIAN SHEVITZ, Mount Kisco, New York (Gerald L. Shargel, Jane Simkin Smith, Carol E. Gette, New York, NY, of counsel) for Petitioners-Appellees.

POLLACK, Senior District Judge:

The government appeals from an order entered in the United States District Court for the Eastern District of New York (Spatt, J.) vacating an ex parte seizure warrant that authorized the seizure of funds belonging to petitioners-appellees Bruce Gordon and several companies under Gordon's control, and releasing funds seized pursuant to the warrant. The district court determined that the government failed to establish probable cause to believe that petitioners had committed mail or wire fraud in violation of 18 U.S.C. Section(s) 1341 and 1343.

For the reasons that follow, we vacate the order and remand for further findings and reconsideration in light of new evidence.

BACKGROUND

Petitioner Bruce Gordon founded and owns a controlling interest in the companies involved in this case, including: Who's Who Worldwide Registry, Inc., Sterling Who's Who, Inc., Who's Who Executive Club, Who's Who Worldwide Communications, Tribute Magazine, Registry Publishing, Inc., Publishing Ventures, Inc., Who's Who of Retailers, and William's Who's Who (collectively, the "Companies"). The oldest of the Companies, Who's Who Worldwide Registry, Inc., was incorporated in 1989.*fn1

Gordon formed the Companies in order to solicit individuals to purchase memberships in the registries published by the Companies. The Companies' salespersons contacted potential customers either by telephone or by sending solicitation letters through the mail. The salespersons explained to potential customers that, upon becoming a member, they would receive a registry containing biographical data and addresses of all members, a personalized plaque, and a camera-ready logo. In addition, customers were told that, as members, they could purchase a CD-ROM version of the registry, a subscription to Tribute, a magazine containing profiles of other members, a credit card, and discounted telephone and travel services. The salespersons also stressed that membership was exclusive and prestigious, and that membership would provide valuable networking opportunities. As a result of their sales efforts, the Companies had acquired more than 60,000 members by the end of 1994.

In July of 1994, based on complaints regarding the Companies' business practices received from the New York State Department of Law, the New York State Consumer Protection Board and the Better Business Bureau, the United States Postal Inspection Service commenced an investigation into Gordon and the Companies. The investigation culminated in a complaint and affidavit (the "Complaint"), sworn to by Postal Inspector Martin T. Biegelman. In the Complaint, Biegelman alleges that the Companies' business operations constitute a "telemarketing boiler room" operation using "high pressure telephone sales pitches that misrepresent the identity of the Company and the nature of its products in order to defraud customers into purchasing one of the Company's `Who's Who' directories and other products." Biegelman contends that the Companies' salespersons made fraudulent representations regarding the nomination and selection process for membership in the registries, the prestige of the registries, free placement in the registries, the identity of other members of the registries, the usefulness of the registries as a networking tool, and the intention of the Companies to hold seminars and conferences. Since 1989, according to Biegelman, Gordon and the Companies have defrauded their customers of more that $22 million dollars. The Complaint concludes with the allegation that the Companies' use of the mail and telephones to conduct the solicitations was in furtherance of a scheme to defraud, and therefore constitutes a violation of the mail and wire fraud statutes.

On March 22, 1995, based on the allegations in the Complaint, United States Magistrate Judge Azrack signed arrest warrants for Gordon and twenty-nine of the Companies' salespersons. The following day, the government obtained an ex parte warrant of seizure, pursuant to Fed. R. Crim. P. 41, authorizing the seizure of funds deposited in certain of the Companies' bank accounts. Thereafter, on March 30, 1995, the government seized over $511,000 of the Companies' funds, allegedly the proceeds of the scheme to defraud. As part of its investigation, the government also began contacting and sending questionnaires to those who purchased registry memberships.

On April 10, 1995, the district court issued a temporary restraining order ("TRO") enjoining the government from sending additional questionnaires to members of the Companies' registries. On April 19 and 20, the district court held a probable cause hearing pursuant to United States v. All Assets of Statewide Auto Parts


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