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U.S. v. GANGI

January 14, 1999

U.S.
v.
ROSARIO GANGI, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Chin, District Judge.

AMENDED MEMORANDUM DECISION

In this RICO and securities fraud case, several defendants move to suppress wiretap evidence. For the reasons set forth below, the motions are denied, except that the request to suppress recordings intercepted by the government after the period of authorization had expired for two of the wiretaps is granted.

BACKGROUND

The superseding indictment in this case charges the defendants with engaging in a scheme to defraud investors by manipulating the market price of stocks for several companies. The government alleges, among other things, that defendants, including alleged members and associates of organized crime families, arranged to artificially inflate the price of stock through deceptive practices and threats of violence.

The wiretap evidence in this case was obtained from wiretaps on cellular telephones used by defendants Eugene Lombardo, Rosario Gangi, and Ernest Montevecchi. On December 30, 1996, based on the affidavit of FBI Special Agent Stephen B. Hessinger, Judge Barbara S. Jones issued an order authorizing a wiretap, for a period of 30 days, on defendant Eugene Lombardo's cellular telephone ("Lombardo I"). The authorization was extended for three additional 30-day periods ("Lombardo II, III, and IV") by Judge Kevin Thomas Duffy.

On April 16, 1997, Lombardo began using a different cellphone and accordingly monitoring of Lombardo's first cellphone ceased. On April 24, 1997, Judge Duffy authorized the wiretapping of Lombardo's new cellphone for a period of 30 days ("Lombardo V"). He later extended the authorization for six additional 30-day periods ("Lombardo VI-XI").

Judge Duffy also authorized a wiretap on defendant Montevecchi's cellphone for a period of 30 days ("Montevecchi I"), which he extended for three additional 30-day periods ("Montevecchi II-IV). Finally, Judge Duffy authorized a wiretap for a period of 30 days on a cellphone used by Gangi ("Gangi I"). Gangi later changed cellphones and Judge Duffy authorized a wiretap on his new cellphone ("Gangi II").

DISCUSSION

The procedures governing the authorization of wiretaps are set out in 18 U.S.C. § 2518. Section 2518(3) requires a judge, before authorizing the interception of wire communications, to determine that (a) there is probable cause for belief that a crime has been, is being, or is about to be committed; (2) there is probable cause for belief that particular communications concerning the crime will be obtained through the wiretapping; (3) normal investigative procedures have been tried and have failed or reasonably appear to be unlikely to succeed or to be too dangerous; and (4) there is probable cause for belief that the phones to be wiretapped are being used for criminal purposes or by the target of the wiretap. See also United States v. Wagner, 989 F.2d 69, 71 (2d Cir. 1993); United States v. Ambrosio, 898 F. Supp. 177, 180 (S.D.N.Y. 1995); United States v. McGuinness, 764 F. Supp. 888, 898 (S.D.N.Y. 1991).

Defendants make several arguments for the suppression of the wiretap evidence in this case: (1) the Hessinger affidavit, which was used in the application for Lombardo I and incorporated in later requests for authorizations, did not contain sufficient facts to support a finding of probable cause that the defendants were engaged in criminal activity; (2) the government failed to meet the requirement that court-ordered electronic surveillance be conducted in a way to minimize the interception of communications not otherwise subject to interception, as set forth in 18 U.S.C. § 2518 (5); (3) during certain of the periods in question agents monitored for more time than the authorization order allowed; and (4) the government, without adequate excuse, failed to obtain the sealing of recordings of electronic surveillance in a timely fashion.*fn1 I will address each of defendants' contentions in turn.

1. Probable Cause

Probable cause to authorize a wiretap "is established if the `totality of the circumstances' contained in the affidavit indicates a probability of criminal activity and that evidence of the criminal activity could be obtained through the use of electronic surveillance." Ambrosio, 898 F. Supp. at 181. The issuing officer must "make a practical, common-sense decision whether, given all the circumstances set forth in the affidavit before him [or her], including the `veracity' and `basis of knowledge' of persons supplying hearsay information, there is fair probability that . . . evidence of a crime will be found." Illinois v. Gates, 462 U.S. 213, 238, 103 S.Ct. 2317, 76 L.Ed.2d 527 (1983).

Additionally, the issuing judicial officer's decision to authorize wiretaps "should be paid great deference by reviewing courts." Spinelli v. United States, 393 U.S. 410, 419, 89 S.Ct. 584, 21 L.Ed.2d 637 (1969). Thus, any doubt as to the existence of probable cause should be resolved in favor of upholding the authorization. Gates, 462 U.S. at 237, 103 S.Ct. 2317.

In authorizing Lombardo I, Judge Jones found that the Hessinger affidavit provided probable cause to believe that the targets of the wiretap (Gangi, Lombardo, Montevecchi, Irwin Schneider and. Claudio Iodice (the "target defendants"))*fn2 were engaging in criminal activities including racketeering, wire fraud, money laundering, extortion and loansharking. Defendants contend that the Hessinger affidavit did not establish probable cause. In contending that Judge Jones erred in her findings, defendants dissect each piece of information in the Hessinger affidavit to show that each fact taken alone does not establish probable cause. "This approach, however, is flawed, for the allegations contained in a wiretap affidavit should be read as a whole and in a common-sense manner." Ambrosio, 898 F. Supp. at 181; see also Gates, 462 U.S. at 230, 103 S.Ct. 2317; United States v. Ruggiero, 824 F. Supp. 379, 399 (S.D.N.Y. 1993), aff'd 44 F.3d 1102 (2d Cir. 1995). Keeping these principles in mind and after reviewing the Hessinger affidavit, I conclude that the Hessinger affidavit provided sufficient probable cause to believe that the targets of the electronic surveillance were engaging in criminal activity.

First, the Hessinger affidavit recited information, given by several confidential informants, on the target defendants' illegal activities. The affidavit explained that three confidential sources ("CS-1," "CS-2," and "CS-3") reported that members and associates of organized crime families were involved in fraudulent schemes to manipulate the price of stocks. All three confidential sources stated that the fraudulent schemes included extorting and threatening owners of small brokerage firms. The confidential sources also stated that the target defendants were involved in the schemes.

Second, the confidential informants gave very specific detail on how the targets were effectuating the fraudulent schemes. For example, one informant, CS-2, described a scheme termed a "clean up" operation, pursuant to which members and associates of organized crime families would take over a company that was in financial straits and merge it with other companies that had been temporally infused with cash to create the facade that the newly created company had a greater net worth than it actually had. Once it appeared that the merged company was financially solvent, steps were taken to trade the company's stock in the market. Additionally, various stock brokers would be given "kickbacks" to promote the stock and some of the defendants or their associates would purchase the stock before the price started to go up. (Hessinger Aff. ΒΆ 17). According to the informants, the stock price would then ...


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