United States District Court, E.D. New York
August 30, 2005.
UNITED STATES OF AMERICA,
RW PROFESSIONAL LEASING SERVICES CORP., also known as "Professional Leasing Services," ROCHELLE BESSER, also known as "Rochelle Drayer," BARRY DRAYER, ROGER DRAYER, ADAM DRAYER, MYRNA KATZ, STEPHEN BARKER, and PAYADDI SHIVASHANKAR Defendants.
The opinion of the court was delivered by: ARTHUR SPATT, District Judge
MEMORANDUM OF DECISION AND ORDER
This case involves charges of conspiracy to commit bank fraud,
wire fraud, and money laundering. Presently before the Court are
objections by defendant RW Professional Leasing Services, Corp.
("PLS"), to the Report and Recommendation ("Report") dated June
23, 2004, of United States Magistrate Judge Michael L. Orenstein.
The Report recommended that the Court deny the defendants' joint
pretrial motion to suppress evidence that was allegedly
unlawfully seized from PLS offices by Frank Zambaras
("Zambaras"), who was identified as a confidential source in a
subsequent application for a search warrant.
A. Procedural History
The background of this case is incorporated in this Court's
three previous memoranda dated May 4, 2004, August 5, 2004, and
December 7, 2004. Familiarity with these decisions is assumed. In
the May 4, 2004 decision, the defendants' motion to suppress
evidence seized by Zambaras was referred to Judge Orenstein to
conduct a suppression hearing and report on whether such evidence
should be suppressed. On June 22 and 23, 2004, Judge Orenstein
conducted a suppression hearing at which Zambaras and Special Agent Rondie Peiscop-Grau of the Federal
Bureau of Investigations ("Special Agent Peiscop-Grau")
At the conclusion of the hearing, Judge Orenstein issued a
Report that recommended denying the Defendants' motion to
suppress the documents obtained by Zambaras. PLS timely objected
to Judge Orenstein's recommendation and argued that Judge
Orenstein applied too narrow a legal standard in denying the
motion because the court purportedly did not consider whether the
government gave "tacit" approval to Zambaras's unlawful conduct.
B. The Suppression Hearing
Zambaras testified at the hearing that he was an equipment
leasing broker who worked as a contractor for PLS from 1992 to
2002. Zambaras admitted that while working for PLS he was
directed by defendant Roger Drayer to fraudulently alter checks.
In the beginning of June, 2002, Zambaras notified Roger Drayer
that he was terminating his contractual relationship with PLS
because it was no longer able to fund his leasing deals.
Also sometime in early June 2002, Zambaras contacted the FBI
and made a complaint about fraudulent activities at PLS. On June
12, 2002, Zambaras met with Special Agent Peiscop-Grau and
supplied her with information concerning fraudulent activity at
PLS. At the meeting, Zambaras indicated that he had previously
removed documents and a CD-ROM from PLS that contained evidence
confirming the information about the fraudulent activities. Zambaras testified
that Special Agent Peiscop-Grau admonished him for removing
property from PLS because he had no authority to take such
materials. She further directed him to retain the materials.
On June 18, 2002, Zambaras and Special Agent Peiscop-Grau met
for a second time. At the meeting Zambaras gave her a box
containing the records that were discussed at the previous
meeting as well as additional records gathered from PLS after the
first meeting. Special Agent Peiscop-Grau again admonished
Zambaras for removing property from PLS offices. Although both
Zambaras and Special Agent Peiscop-Grau testified that she told
Zambaras that he was not a government agent and was not
authorized to take documents from PLS, she did not refer to this
instruction in her "Form 302," which is the form used to
memorialize an agent's meeting with an individual.
On June 20, 2002, Special Agent Peiscop-Grau executed an
affidavit in support of an application for a warrant to search
PLS's offices, which referred to documents that Zambaras had
taken from PLS. On June 21, 2002, the FBI executed the search of
PLS offices pursuant to the search warrant obtained. Zambaras was
asked to assist, and did assist, the government agents in
searching the PLS offices pursuant to the warrant.
C. Magistrate Judge Orenstein's Report and Recommendation Judge Orenstein found that the taking of the documents and
information from PLS after Zambaras met with Special Agent
Peiscop-Grau was done while he was acting on his own behalf, and
not on behalf of the government. Specifically, Judge Orenstein
noted that when Zambaras met with Agent Peiscop-Grau, Zambaras
indicated that he had already taken the documents but did not
have them with him. Also, during the discussions the agent
admonished and warned Zambaras that he was not acting undercover;
was not authorized to take documents; and that he did not have
any authority to take documents. In response, Zamabaras testified
that he knew he had no authority to take documents, but testified
that he felt it was critical that he take them so that they would
not be destroyed.
Judge Orenstein concluded that it was immaterial whether
Special Agent Peiscop-Grau had knowledge or believed that
Zambaras was going to take additional materials from PLS.
Instead, Judge Orenstein emphasized that the issue was whether
the Special Agent told "him or [did] anything which either
required, asked, recruited, requested, encouraged, [or]
importuned Zambaras to obtain the documents." Suppression Hr'g
Tr. 306-07, June 23, 2004. Judge Orenstein found that "there has
not been one shred or scintilla of evidence that the government
tacitly involved itself in Mr. Zambaras' independent act of
taking documents after June 12, 2002." Hr'g Tr. 307-08. Further, Judge Orenstein found that it was proper for Special
Agent Peiscop-Grau to accept the documents from Zambaras, even
though they may have been obtained by theft or burglary. Judge
Orenstein noted that as soon as Special Agent Peiscop-Grau
received the documents, she sought advice from the Assistant
United States Attorney as to whether it was proper to take the
A. Standard of Review
Pursuant to 28 U.S.C. § 636(b)(1), any party may file written
objections to the report and recommendation of a magistrate judge
within ten days after being served with a copy. Id.; see
also Fed.R.Civ.P. 72(a). Once objections are filed, the
district court is required to make a de novo determination as
to those portions of the report and recommendation to which
objections were made. See 28 U.S.C. § 636(b)(1); Brassia v.
Scull, 892 F.2d 16, 19 (2d Cir. 1989). The phrase "de novo
determination" in section 636(b)(1) as opposed to "de novo
hearing" was selected by Congress "to permit whatever reliance
a district judge, in the exercise of sound judicial discretion,
chose to place on a magistrate's proposed findings and
recommendations." United States v. Radios, 447 U.S. 667, 676,
100 S. Ct. 2406 (1980).
Section 636 does not require the district court "to rehear the
contested testimony in order to carry out the required
`determination.'" Id. at 674. Rather, in making such a
determination, the district court may, in its discretion, review
the record and hear oral argument on the matter. See Pan Am. World
Airways, Inc. v. International Brotherhood of Teamsters,
894 F.2d 36, 40 n. 3 (2d Cir. 1990). Furthermore, the district judge
may also, in his sound discretion, afford a degree of deference
to the Magistrate Judge's Report and Recommendations. See U.S.
v. Radios, 447 U.S. 667, 676, 100 S. Ct. 2406, 65 L. Ed. 2d 424
B. Surreptitious Search and Seizure by a Private Party
It has long been settled that "a wrongful search or seizure
conducted by a private party does not violate the Fourth
Amendment and that such private wrongdoing does not deprive the
government of the right to use evidence that it has acquired
lawfully." Walter v. United States, 447 U.S. 649, 656,
100 S. Ct. 2395, 65 L. Ed. 2d 410 (1980); see also Burdeau v.
McDowell, 256 U.S. 465, 475, 41 S. Ct. 574, 65 L. Ed. 1048
(1921). The Second Circuit has stated that the "surreptitious
search of premises by a private party does not violate the Fourth
Amendment" unless such individual is acting as an instrument or
agent of the government in obtaining evidence. United States v.
Bennett, 709 F.2d 803, 805 (2d Cir. 1983). If the government
"was in it before the object of the search was completely
accomplished [by the private party, it] must be deemed to have
participated in it." Id. (quoting Lustig v. United States,
338 U.S. 74, 78-79, 93 L. Ed. 1819, 69 S. Ct. 1372 (1949)). It is
"`immaterial' whether the government originated the idea for a
search or joined it while it was in progress." United States v. Knoll, 16 F.3d 1313, 1320 (2d Cir. 1994)
(quoting Lustig, 338 U.S. at 78-79).
"Whether a private party should be deemed an agent or
instrument of the Government for Fourth Amendment purposes
necessarily turns on the degree of the Government's participation
in the private party's activities, a question that can only be
resolved in light of the circumstances." Skinner v. Rwy. Labor
Executives Assoc., 489 U.S. 602, 614, 103 L. Ed. 2d 639,
109 S. Ct. 1402 (1989) (citations omitted). The Second Circuit has noted
that "[t]he government may become a party to a search through
nothing more than tacit approval." Knoll, 16 F.3d at 1320
(citing 1 Wayne R. LaFave, Search & Seizure § 1.8(b), at 180 (2d
ed. 1987)). In Knoll, the Second Circuit recognized that
private individuals may be considered acting as government agents
if the government directs their actions or tacitly approves of
whatever measures were taken to seize the evidence. Id. Thus,
the protections of the Fourth Amendment are invoked if the
government directs or tacitly approves of a surreptitious search
by private individuals.
C. PLS Objections to the Report and Recommendation
PLS argues that Judge Orenstein applied too narrow a legal
standard in recommending that the defendants' motion to suppress
be denied because the Report failed to fully apply the Second
Circuit's ruling in Knoll. The Court disagrees. The Report issued by Judge Orenstein clearly embraces the legal
standards enunciated in Knoll. The Report states:
[t]he issue before the Court is whether there was
tacit approval of Mr. Zambaras's activities on or
after June 12. . . .
. . . .
This Court specifically finds that there has not been
one shred or scintilla of evidence that the
government tacitly involved itself in Mr. Zambaras'
independent act of taking documents after June 12,
H'rg Tr. 304, 308.
PLS argues that Knoll requires a court to look beyond the
formal relationship between the government and private party and
to consider the "reality" of the relationship. While the Court
agrees that it is essential to perform a critical analysis of the
relationship between the private party and the government, the
Court cannot disregard the evidence or make assumptions about the
"reality" of the relationship that are not supported by the
evidence. In Knoll, there was testimony that the government
agent encouraged the private party after learning of the
surreptitious search by making statements such as "get me more
information," "you've got to turn more over," and "[i]f there's
stuff out there, you've got to turn it over." Knoll,
16 F.3d at 1320. The Second Circuit reasoned that these statements, made
prior to the carrying out the private search, may have tacitly
approved such conduct.
In this case there was absolutely no evidence that the
government directed, encouraged, or tacitly approved of Zambaras'
actions. Both Zambaras and Special Agent Peiscop-Grau testified that she told Zambaras that he was
not a government agent and was not authorized to take documents
from PLS. After their first meeting, Special Agent Peiscop-Grau
did not encourage Zambaras to obtain additional documents.
Rather, she repeatedly admonished Zambaras for taking the
materials. Also, instead of asking Zambaras to seize additional
evidence, Special Agent Peiscop-Grau immediately sought advice
from an Assistant United States Attorney and a search warrant
from the court. In sum, there is absolutely no evidence in the
record that the government directed or tacitly approved the
search and seizure executed by Zambaras. Therefore, the Court
finds that Judge Orenstein correctly determined that Zambaras was
not acting as a government agent in any way.
After carefully reviewing Judge Orenstein's well-reasoned and
thorough Report, the Court concludes that his Report is certainly
not clearly erroneous. Judge Orenstein applied the proper
standard and reasonably applied the facts obtained from all the
testimony given at the suppression hearing to the law.
Accordingly, the Court adopts Judge Orenstein's Report and denies
the motion to suppress the evidence.
For all the foregoing reasons, it is hereby
ORDERED, that the Court adopts Judge Orenstein's Report in
its entirety; and it is further ORDERED, that the defendants motion to suppress the evidence
obtained by Zambaras is denied.
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