The opinion of the court was delivered by: John G. Koeltl, United States District Judge.
The defendants in this case — Thomas M. Rittweger ("Rittweger"), Douglas C. Brandon ("Brandon"), Robert S. DeHaven ("DeHaven") and Victor M. Wexler ("Wexler") — were charged in a thirteen-count indictment on January 31, 2002. The Grand Jury returned a superseding indictment on April 9, 2003 ("the Indictment").*fn1 The Indictment charges the defendants with offenses including conspiracy as well as various substantive crimes.
Defendants Rittweger, DeHaven, and Wexler (the "moving defendants") now move to suppress certain recordings of DeHaven's telephone conversations (the "Mitsui tapes") which were recorded by his employer Mitsui Trust Company (U.S.A.) ("Mitsui Trust"). The moving defendants argue that the tapes should be suppressed pursuant to Title III of the Omnibus Crime Control and Safe Streets Act of 1968 ("Title III"), as amended, 18 U.S.C. § 2510-2521, because they were reviewed in violation of Title III.*fn2 The Government argues that the tapes are admissible under any one of the three different exceptions to Title III: a "clean hands" exception, a "business purpose exception", or consent.*fn3 The Court held an evidentiary hearing on the motion on April 15-16, 2003. After considering all of the evidence the Court makes the following findings of fact.*fn4
DeHaven worked at Mitsui Trust Company (U.S.A.) ("Mitsui Trust") from September 1991 through October 2000 as a Vice President in the Securities Lending Department where his responsibilities included conducting securities transactions over the telephone. (Affidavit of Michelle S. Kim sworn Mar. 13, 2003 ("Kim Aff.") ¶ 4.) Mitsui Trust conducted trust operations, custody, and securities lending operations, among other things. (Transcript of April 15-16 Hearing ("Tr.") at 8.) Also located in New York was Mitsui Banking Company ("the New York Branch") which conducted loan and trading operations, foreign exchange, futures, and options. (Tr. at 8.)
Throughout DeHaven's time at Mitsui Trust, his calls were automatically recorded in accordance with a company policy to record all telephone calls made by employees involved in trading activities. (Affidavit of Jeremiah E. Dunne sworn Mar. 2003 ("Dunne Aff.") ¶ 2; Kim Aff. ¶¶ 6-7.) The primary purpose of the recordings was to preserve a record for use in resolving any disputes about the terms of transactions negotiated over the telephone. (Dunne Aff. ¶ 3; Kim Aff. ¶ 8; Affidavit of Stuart Bricker sworn Mar. 12, 2003 ("Bricker Aff.") ¶ 2.) Several witnesses testified credibly that it is standard industry practice in the financial services industry to record conversations on telephone lines on which financial transactions are negotiated and discussed. (Bricker Aff. ¶ 5; Dunne Aff. ¶ 3; Kim Aff. ¶ 68; Tr. at 101, 302.)
By August 1997, Mitsui Trust began using a Racal telephone recording system to record phone calls. (Dunne Aff. ¶ 4.; Tr. at 233, 250.) Mitsui Trust purchased the system directly from Racal. (Dunne Aff. ¶ 4.) The Racal system consisted of a 64-track machine that recorded on digital audio tapes ("DATs") and was connected directly to the telephone facilities provided by the telephone service provider. (Dunne Aff. ¶ 4; Tr. at 304, 308.) The system recorded both incoming and outgoing calls on lines in the Mitsui Trust trading room, including all lines for the securities lending area. (Dunne Aff. ¶ 4; Tr. at 178, 234.) This included DeHaven's telephone lines. (Dunne Aff. ¶ 4.) The tapes were used by traders or support personnel who needed to check a discrepancy in the settlement of a transaction, for internal audits, and during two internal investigations discussed below. (Tr. at 238-39, 245.)
In 1997, Stuart Bricker ("Bricker"), an internal auditor at Mitsui Trust, (Tr. at 100), conducted an audit of the Securities Lending Department. (Tr. at 105-06.) Bricker testified that during the audit he reviewed tape recordings of certain phone transactions from the Securities Lending Department in order to verify those transactions against subsequent documentation. (Tr. at 106.) At the conclusion of the audit Bricker created a draft audit report that he discussed with senior Mitsui Trust managers, including DeHaven, on October 31, 1997. (Tr. at 108-111; Memorandum and Report of Audit of Securities Lending Area dated Nov. 3, 1997 ("Audit Report"), Gov. Ex. 5.) Bricker hand delivered a copy of the draft report to DeHaven and two other executives. (Tr. at 110.) After the meeting, Bricker hand delivered the final report to DeHaven and the other two executives. (Gov. Ex. 5; Tr. at 112.)
The Appendix to the report lists the steps Bricker took during the audit, including "tracing the transactions to phone recordings for accuracy." (Audit Report Appendix.) The report itself states clearly under the heading "Recorded Phone Line Review" — "The phones in the `Trading Room' and in the Securities Lending Operations area are recorded in order to assist in the event that there is a dispute with a counterparty after a deal has been transacted." (Gov. Ex. 5.) Bricker asked for DeHaven' s comments with regard to certain problems that became apparent when various transactions were traced from the transaction ticket to recorded phone calls over the course of the audit. (Audit Report at 1 and IV.B.2; Tr. at 114-119.) Although Bricker does not recall DeHaven's exact response, he is sure that DeHaven did respond to the request because Bricker was responsible for ensuring that all audit concerns were properly addressed and never had a problem obtaining the necessary responses from the appropriate personnel. (Tr. at 118-19.) In an affidavit submitted to the Court DeHaven denies ever receiving the Audit Report or Bricker's accompanying memorandum soliciting his response. (Affidavit of Robert S. DeHaven sworn Mar. 21, 2003 ("DeHaven Aff.") ¶ 7.) That denial is not credible in view of Mr. Bricker's detailed testimony, his regular practice, and the explicit statements in the Audit Report.
In early 1999, Mitsui Trust senior management conducted an internal investigation into allegations by DeHaven's assistant that DeHaven was using company telephones and other facilities to conduct personal business from Mitsui Trust, including personal securities trading activities. (Kim Aff. ¶ 9; Tr. at 15-17.) At the suppression hearing, Adrienne Blitzer ("Blitzer"), the former Vice President for Human Resources at Mitsui Trust, (Tr. at 9), testified that, in March or April 1999, she met with DeHaven and Shigeru Sugimoto ("Sugimoto"), Senior Vice President of Mitsui Trust, about the allegations. (Tr. at 17, 319.) Blitzer testified that DeHaven denied the allegations and stated that "If you don't believe me, listen to the telephone tapes," which Blitzer understood to mean the tapes of all of his telephone calls from the trading room where he worked.*fn5 (Tr. at 14, 17, 23.)
Blitzer testified on cross examination, that despite forgetting certain details of the meeting she remembered "exactly what Bob [DeHaven] said because the way he said it was like, I can't believe you believe [the assistant] over me. That's the recollection. So that's what I remember." (Tr. at 89.) Blitzer, who no longer works for Mitsui Trust, testified that the comment was out of the ordinary, so she was "a hundred percent, I remember that." (Id.) Blitzer memorialized DeHaven's comment in a May 3, 1999 memorandum that she drafted summarizing the performance conference in which she wrote, "In our meeting, you stated that we should listen to the daily telephone tapes in the trading room to prove that [your assistant's] allegations are groundless and that your behavior in no way violates the policies of our bank or the governmental trading regulations." (Draft Memorandum dated May 3, 1999, Gov. Ex. 1.)
Blitzer subsequently listened to some of DeHaven's recorded conversations but was unable to determine whether a basis for the allegations existed because she could not understand the trading vocabulary being used. (Tr. at 24.) Outside counsel was then hired to conduct the investigation. (Tr. at 25.) On May 5, 1999 DeHaven received a written warning from Sugimoto about, among other things, his excessive use of the Bank telephone for personal business. (Memorandum from Sugimoto to DeHaven dated May 5, 1999 attached as Ex. B to Kim Aff.) DeHaven acknowledges receipt of the memorandum but denies that he was ever informed that the reprimand resulted from anyone recording or listening to his telephone conversations. (DeHaven Aff. ¶ 10.) In fact, DeHaven denies ever knowing of or consenting to any recording or listening in connection with his phone conversations while at Mitsui Trust. (DeHaven Aff. ¶ 2.)*fn6 These denials are not credible given Blitzer's detailed and credible recollection of the meeting with DeHaven as well as her draft memo reflecting DeHaven's contemporaneous comment. Moreover, DeHaven's blanket denial of knowledge of the taping of and listening to his calls at Mitsui Trust is not only inconsistent with the events in the 1997 audit and the 1999 investigation, it is inconsistent with the other evidence of knowledge detailed below.
In July 1999 Mitsui Trust revamped its employee handbook ("1999 Handbook") and Blitzer distributed copies to employees the following month. (Tr. at 30.) The 1999 Handbook contained the following provision which, as far as Blitzer knows, is the first time that a section on taped telephone calls appeared in a Mitsui Trust employee handbook:
For audit and control purposes, certain telephone
lines of the Company are recorded. Please be aware
that if you use one of the recorded telephone lines,
your telephone conversations will be recorded and the
Company has the right to review the recordings of such
conversations and may be required to make such
recordings available to the Company's regulators. For
those employees who regularly use recorded telephone
lines, the Company will require such employees to give
their express written consent to such recording.
(1999 Handbook, Gov. Ex. 3 at 20; Tr. at 33-34.) Along with the 1999 Handbook Blitzer gave employees a memorandum and a form to acknowledge receipt of the materials. (Tr. at 31.) Blitzer testified that she knows that DeHaven received the 1999 Handbook and memorandum and filled out an acknowledgment form because all employees had done so. (Tr. at 31.) Blitzer kept a list of every employee's name that she would check off when they completed the form. (Tr. at 31.) When the list was complete Blitzer circulated the list to the compliance officer and senior management for approval before it was filed. (Tr. at 31.) Blitzer last saw the acknowledgment forms on July 31, 2001 when she packed her things ...