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U.S. v. NUMISGROUP INTERN. CORP.

March 23, 2001

UNITED STATES OF AMERICA,
V.
NUMISGROUP INTERNATIONAL CORP., NUMISMATIC ASSET STRATEGIES, INC., GALERIE DES NUMISATIQUE, MERIDIAN NUMISATICS, INC., ROBERT DUPURTON AND TOM PAULL, DEFENDANTS.



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

This suppression hearing was initiated because of the information provided in a letter from Douglas E. Grover, Esq., dated March 9, 2001. In this letter Attorney Grover asserted that there was a theft of documents from the Numisgroup offices by an undercover informant, which theft constituted an illegal search. Further, Attorney Grover contends that this illegal seizure by an agent of the Government vitiates the search warrant previously issued, under which multitudes of records were seized by the Government. The defendants move for the suppression of these documents.

The affidavit in support of the application for arrest and search warrants, by United States Postal Inspector Sol Farash, dated February 25, 2000 describes a conspiracy to defraud with regard to the sale of valuable coins. In this affidavit, Inspector Farash describes a "boiler room" sales operation consisting of a scheme to "fraudulently sell items (coins) at highly inflated prices by means of false and fraudulent representations." Inspector Farash conducted an investigation into the activities of the coin sale businesses involved in this case. He interviewed approximately twenty persons who purchased coins from Numisgroup, Galerie des Numisatique and/or Meridian. Farash also interviewed "a confidential informant," we now know to be one Michael Zelen, "who at the direction and under the supervision of law enforcement agents, obtained a position as a sales person with Numisgroup."

A review of the affidavit in regard to the allegations leading to this suppression hearing reveals that Inspector Farash interviewed George Barre, Roxie Hollingshead and John Pirile, names of customers given to him by the confidential informant. These customers gave relevant information to Farash.

The thrust of the defendants' contention is that, the confidential informant, identified as Michael Zelen, acting as a government agent, illegally seized documents or otherwise illegally obtained information, which was used by Inspector Farash in his affidavit which supported the Government's successful application for a search warrant. Under these circumstances, according to the defendants, the "fruit of the poisonous tree — the records seized in the Numisgroup office" — must be suppressed.

A suppression hearing was held in response to the defendants' position on March 13 and 14, 2001.

I. THE LEGAL STANDARDS

Presently before the Court are motions by the defendants to suppress any evidence obtained pursuant to the search warrant on the grounds that the information in the affidavit in support of the warrant was illegally obtained by confidential informant Michael Zelen in violation of the defendants' Fourth Amendment rights.

In order to successfully challenge a search warrant based on the allegations in a supporting affidavit, a defendant "must show by a preponderance of the evidence that the affidavit contained false statements that were material on the issue of probable cause." U.S. v. Wapnick, 60 F.3d 948 (2d Cir. 1995); see also Franks v. Delaware, 438 U.S. 154, 98 S.Ct. 2674, 57 L.Ed.2d 667 (1978). Where the affiant obtains his information from a government informant, a deliberate or reckless falsehood or omission may be grounds for suppression. Id. In this case, the Government concedes that Zelen was a confidential informant working undercover for the Government, and thus, any searches or seizures he conducted are the equivalent of Government searches for purposes of the Fourth Amendment.

The defendants' right to be free from unlawful searches extends only to those items in which they possess a legitimate expectation of privacy. U.S. v. Knoll, 16 F.3d 1313, 1320 (2d Cir. 1994). In Knoll, the Second Circuit discussed the situation in which a government agent makes an unauthorized "search" in a suspect's office. Obviously, if documents are given, made available or openly displayed in plain view to a sales person in the course of his employment, there is no reasonable expectation of privacy and the documents may be used by the Government. It is only when the documents are secured in folders or in locked or even closed private filing cabinets, that the expectation of privacy protects the documents. As stated in Knoll:

The Fourth Amendment only protects against a search that intrudes upon an individual's reasonable expectation of privacy. See Illinois v. Andreas, 463 U.S. 765, 771, 103 S.Ct. 3319, 3324, 77 L.Ed.2d 1003 (1983).
Under Fourth Amendment law a container need not be locked or fastened shut for there to be a legitimate expectation of privacy in its contents, though those facts are emphasized when they exist. See, e.g., Smith v. Ohio, 494 U.S. 541, 541-42, 110 S.Ct. 1288, 1289, 108 L.Ed.2d 464 (1990) (brown paper bag is a closed container); United States v. Donnes, 947 F.2d 1430, 1435-36 (10th Cir. 1991) (reasonable expectation of privacy in opaque camera lens case). The Supreme Court has rejected a constitutional distinction between "worthy" and "unworthy" containers and has noted that "the Fourth Amendment provides protection to the owner of every container that conceals its contents from plain view." United States v. Ross, 456 U.S. 798, 822-23, 102 S.Ct. 2157, 2171-72, 72 L.Ed.2d 572 (1982). The often-stated requirement that a container need only be "closed" reflects the standard that for there to be a reasonable expectation of privacy, the contents of a container should not be apparent without opening.
So long as the opaque file folders were closed or were in closed boxes, and did not reveal their contents, then a reasonable expectation of privacy continued even after they were stolen from Knoll's office.

The defendants could not support an expectation of privacy in information made available to Zelen in his capacity as salesperson. See, e.g., U.S. v. Jenkins, 43 F.3d 447 (5th Cir. 1995) (there is no Fourth Amendment violation where informant/employee with routine access to his employer's videotapes searched those tapes and produced them to the Government); United States v. Goldin, 1996 WL 294366 at * 16 (S.D.Ala. 1996) (there is no violation where company secretary produced to Government corporate documents that she had access to as part of her employment responsibilities); see also United States v. Bonfiglio, 713 F.2d 932, 937 (2d Cir. 1983) (clearly labeled cassette tape "had the practical effect of putting the contents of the tape in plain view and therefore reducing the expectation of privacy").

Of course, if the Numisgroup search is found to be invalid, virtually all the documentary evidence seized by the Government from the Numisgroup offices may require suppression as "fruits of the poisonous tree." Wong Sun v. United States, 371 U.S. 471, 487-88, 83 S.Ct. 407, 417-18, 9 L.Ed.2d 441 (1963).

II. THE HEARING — FINDINGS OF FACT

There were only two witnesses presented at the hearing, Inspector Sol Farash and Michael Zelen, both produced by the Government.

Inspector Sol Farash testified that he was first involved in this matter when he received a call from United States Postal Inspector Mike Hartman from the Harrisburg, Pennsylvania division. Hartman advised him that he had a coin boiler room case and "that he had an individual who was willing to work, who came from the Long Island, New York area." That person, Michael Zelen, had been arrested for and pled guilty to another crime in Pennsylvania. Zelen told Farash about coin boiler rooms on Long Island, including companies called Numisgroup and Nationwide, also known as Meridian, in Holbrook, with one Bob Dupurton as the owner. Zelen told Farash that Dupurton was selling "rare coins" in a classic boiler room operation. Zelen also mentioned other companies called New World Rarities and Heritage Numismatic.

Zelen responded to an employment ad by Numisgroup and set up an interview with John Laura of that company. Farash recalled that he had arrested a John Laura six or seven years ago for a boiler room operation involving chemicals. On September 7, 1999, the day Zelen was to start work at Numisgroup, he met with Farash who directed him to comply with seven conditions (see U.S. Ex. 7). One of the conditions was: "4. You do not do anything illegal. Must Be Clean."

Farash testified that he told Zelen on that occasion:

Number four, which I highlighted, and I underlined, you do not, I underlined both, do anything illegal. You must be clean. You must not take anything. You must do nothing wrong. You are working as an agent for the government.
Q And number four says, you do not do anything illegal, must be clean; is that right?

A Yes.

Q Were those the exact words that you related to Mr. Zelen?

A And more.

Q And more.

But all you wrote down is you did not — do not do anything illegal, must be clean; is that correct?

A Yes.

Q On direct examination did you say you said something additional in that vein?

A Yes.

Q What was it that you recollect you told Mr. Zelen along that vein?
A In substance, I don't want him stealing anything. I don't want him cheating anybody. I don't want anything illegal. In other words, you have to be squeaky clean because you are an agent of the government.
Q And those are the things that you recollect telling him?

A In substance, yes.

Q Don't steal anything?

A Yes.

Q Don't take anything?

A Yes.

Q Don't do anything ...


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