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United States v. Vilar

January 14, 2008

UNITED STATES OF AMERICA,
v.
ALBERTO WILLIAM VILAR AND GARY ALAN TANAKA, DEFENDANTS.



The opinion of the court was delivered by: Richard J. Sullivan, District Judge

MEMORANDUM AND ORDER

Defendants Alberto William Vilar ("Vilar") and Gary Alan Tanaka ("Tanaka") are charged with conspiracy to commit securities fraud, as well as substantive counts alleging securities fraud, investment adviser fraud, mail fraud, wire fraud, and money laundering. The parties to this action now seek a finding as to whether the Government may offer at trial certain documents recovered from the New York office of Amerindo Investment Advisors Inc. ("Amerindo"), of which Defendants were co-founders and two of its shareholders, officers, and directors. Specifically, the parties dispute whether the inevitable discovery and independent source exceptions to the exclusionary rule permit the Government to offer the documents at trial notwithstanding the fact that they were seized from Amerindo's office during an unlawful search. In addition, Defendants seek to obtain certain disclosures from the Government relating to its purported use of unlawfully obtained evidence in procuring additional, "tainted" evidence, and assert that this Court must resolve any issues relating to such evidence prior to trial, rather than after the trial and verdict in this action.

For the reasons set forth below, the Court finds that the documents at issue in this action may be offered at trial by the Government on the basis of the inevitable discovery and independent source doctrines. In addition, Defendants' specific requests for disclosures from the Government are denied. However, prior to the trial in this action, the Government is directed to disclose to Defendants lists of the witnesses, the exhibits, and the Rule 404(b) evidence that it intends to offer at trial, upon which Defendants may rely in moving to suppress tainted evidence. Finally, although the Court reserves decision on the question of when it will resolve any taint motions filed in this action, it rejects Defendants' assertion that, as a matter of law, all such motions must be resolved prior to trial. Rather, this Court may, for good cause shown, resolve such motions after the trial and verdict in this action.

I. BACKGROUND

The Court presumes the parties' familiarity with the facts and procedural history of this action, and, therefore, recites only those facts necessary to resolve the instant motions.*fn1 In addition, in the body of the "Discussion" section, the Court recites certain additional facts relevant to specific portions of this opinion.

On May 26, 2005, at 8:15 a.m., the Government executed a search warrant (the "Warrant") at the New York office of Amerindo. (April 4, 2007 Order (hereinafter, the "Order") at 15.) The ensuing search lasted approximately twelve hours, and, as a result, the Government seized approximately 170 boxes of documents and 30 computers containing 1.6 terabytes of information. (Id.)

As discussed in greater detail below, at some point during the search, Marc Litt ("Mr. Litt"), the Assistant United States Attorney assigned to this case, had a conversation with Eugene Licker ("Mr. Licker"), Amerindo's counsel, wherein Mr. Licker asked whether the Government intended to serve a grand jury subpoena upon Amerindo. (Order at 18.) Subsequent to that conversation, Mr. Litt drafted a grand jury subpoena (the "Subpoena") that was coextensive with the provisions of the Warrant. (Id. at 19; May 31 Tr. at 95.) Mr. Litt faxed the Subpoena to Mr. Licker at approximately 1:37 p.m. on May 26, 2005. (Id. at 19.)

At some point later that day, after Mr. Litt had already served the Subpoena on Mr. Licker, the two individuals had another conversation, wherein Mr. Licker stated that, because the search would not be completed in one day, Amerindo would produce documents pursuant to the Subpoena if the Government would cease its search of Amerindo's office. (Id. at 18-19; May 31 Tr. at 106-07.) Shortly thereafter, the Government ceased its search of Amerindo's office. (Order at 19.)

On August 12, 2005, both Defendants filed, inter alia, motions to suppress the materials seized pursuant to the Warrant. (Id. at 34.) On December 14, 2005, the Honorable Kenneth M. Karas, District Judge, held a hearing regarding Defendants' motions. (Id.) On December 15, 2005, Defendants filed a motion to quash the Subpoena. (Id. at 34.) Judge Karas conducted additional hearings regarding the motions to suppress and to quash on May 31, June 1, July 7, July 10, August 8, and August 9, 2006. (Id.)

On April 4, 2007, Judge Karas issued the Order denying in part and granting in part both (1) Defendants' motions to suppress the evidence seized pursuant to the Warrant, and (2) Defendants' motion to quash the Subpoena. (See Order at 35-66, 76-99.) Pursuant to the Fourth Amendment's probable cause, particularity, and reasonableness requirements, Judge Karas narrowed the scope of the Warrant, and, to a lesser extent, narrowed the scope of the Subpoena. (See id.)

Accordingly, Judge Karas found that the documents seized from Amerindo's office pursuant to the invalid portions of the Warrant could not be offered at trial by the Government. (Id. at 67.) Nevertheless, Judge Karas found that, "given the more relaxed relevancy requirements applied in evaluating a subpoena," there was a "broader set of documents" that could be lawfully pursued by means of the Subpoena rather than by means of the Warrant. (Id. at 94.) As a result, Judge Karas' modifications of the Warrant and the Subpoena, respectively, created a category of documents that, although they were illegally seized from Amerindo's office pursuant to the invalid portions of the Warrant, fell within the scope of the valid portions of the Subpoena.*fn2

On August 17, 2007, defendant Tanaka filed a "Motion to Effectuate the Court's April 4, 2007 Order of Suppression," wherein he argued that the Challenged Documents should be suppressed. On August 20, 2007, defendant Vilar filed a "Motion to Suppress Fruits of Unlawful Search, and Related Relief," seeking (1) discovery from the Government regarding its use, if any, of illegally seized evidence, and (2) a finding that Defendants' anticipated "taint" motion should be resolved prior to trial in this action.*fn3 The Court heard oral argument regarding Defendants' motions on December 17, 2007.*fn4

II. DISCUSSION

A. The Challenged Documents

Judge Karas held in the Order that the Government seized the Challenged Documents pursuant to portions of the Warrant that were later found to be invalid. (Order at 67.) As such, Judge Karas suppressed the Challenged Documents on the basis of the exclusionary rule. (Id.) At the same time, Judge Karas found, as noted above, that the Subpoena contained lawful requests for "a broader set of documents than that permissible under the severed Warrant" - namely, the requests for the Challenged Documents - and deemed that result "unsurprising . . . given the more relaxed relevancy requirements applied in evaluating a subpoena." (Id. at 94.) Ultimately, however, Judge Karas did not resolve - or even reach - the question of whether the Challenged Documents should be suppressed pursuant to the Warrant or deemed admissible as evidence obtained pursuant to the lawful portions of the Subpoena. It is left to this Court to do so.

The Government now asserts that the Challenged Documents are admissible on the basis of the inevitable discovery and independent source exceptions to the exclusionary rule.*fn5 By contrast, Defendants assert that the Challenge Documents must be excluded from use at trial because: (1) the Government has failed to assert in a timely fashion its arguments relating to the inevitable discovery and independent source doctrines and, thus, has waived its right to do so; and, (2) even assuming arguendo that the Government had properly asserted such arguments, the Government has failed to establish that those exceptions to the exclusionary rule apply in the instant case.

For the following reasons, the Court rejects Defendants' waiver argument, and holds that the Challenged Documents may be offered at trial pursuant to the inevitable discovery and independent source doctrines.

1. Timeliness of the Government's Arguments Relating to Suppression

The Court rejects Defendants' assertion that the Government has waived its ability to raise arguments regarding the admissibility of the Challenged Documents by failing to assert arguments relating to that issue in response to Defendants' initial suppression motion. (See Tanaka Mem. at 4-5.)

Indeed, the Government promptly presented arguments relating to the admissibility of the Challenged Documents at the appropriate stages of this case. On December 13, 2006, prior to issuance of the Order, the Government relayed its position as to the admissibility of evidence obtained pursuant to the Subpoena by asserting that:

Because the grand jury subpoena was in large part co-extensive with the search warrant, were the Court to deny defendants' motion to quash [the Subpoena] . . . the Court would not need to decide the defendants' motion concerning . . . the Warrant . . . .

(Gov't's Dec. 13, 2006 Post-Hr'g. Mem. at 38.) This argument unambiguously conveyed to the Court and to Defendants the Government's view that the Subpoena constituted a lawful method of procuring evidence from Amerindo's office, and that the Government should be permitted to offer at trial any evidence within the scope of the Subpoena, notwithstanding the admissibility of evidence seized pursuant to the Warrant. Of course, the Government's argument did not address any issues specifically relating to the Challenged Documents, as they did not exist as a class of documents prior to the issuance of the Order.

Subsequently, Judge Karas did not address the issue raised by the Government regarding the admissibility of documents requested in the Subpoena notwithstanding the validity of the Warrant. Rather, in the Order, Judge Karas simultaneously suppressed the Challenged Documents pursuant to the Warrant, and deemed them discoverable pursuant to the Subpoena (see Order at 67, 94), and did not even attempt to resolve the tension between the invalid portions of the Warrant and the valid portions of the Subpoena. Instead, Judge Karas and the parties addressed this issue at a conference held on April 13, 2007, nine days after the Order had been issued. (See April 13 Tr. at 24.)

At that time, Tanaka's counsel indicated that any issues regarding suppression of the Challenged Documents had not been determined during the prior proceedings and would be the subject of a forthcoming debate:

I imagine that we . . . will have a debate on the usability and admissibility of documents your Honor has suppressed but yet ordered produced pursuant to the subpoena . . . . [I]f the government has a position [on this issue], please tell us. If they don't, please ask the government to give you a position by April 27.

(April 13 Tr. at 24 (emphasis added).) Judge Karas then confirmed that this issue presented, at that time, an open question:

JUDGE KARAS: It's pretty clear to me that the government's view is, even if something is suppressed by the modified search warrant [as it exists following the Order], they get to use it if it's responsive to the subpoena. Am I wrong on that . . . ?

THE GOVERNMENT: No.

JUDGE KARAS [to Tanaka's counsel]: So you're saying you're going to challenge [the Government's] use of materials that are suppressed under the warrant but responsive to the subpoena, is that what you're saying? You may challenge the admissibility of those materials.

TANAKA'S COUNSEL: Yes.

(Id. at 24-25.)*fn6

Therefore, although the Government "may lose its right to raise" issues relating to the suppression of evidence "when it has acquiesced in contrary findings" - such as a suppression order - "or when it has failed to raise such questions in a timely fashion during the litigation," the Court finds that the instant case does not present such a situation. Steagald v. United States, 421 U.S. 204, 209 (1981); see United States v. Persico, 832 F.2d 705, 714 & n.2 (2d Cir. 1987) ("[T]he government apparently concedes that it did not raise this issue in the district court, and has offered no justification for its failure to do so. Therefore, we deem the issue to be waived.") (collecting cases); accord United States v. Head, 737 F. Supp. 1287, 1288 (W.D.N.Y. 1990) ("The government's present constitutional argument may well have merit. But the fact remains that it was not raised before, and it would be exceptionally unfair to the defendant to allow the government, with the benefit of hindsight after having lost based on its original arguments, to . . . raise a new argument that should have been raised in the first instance.") (citing Steagald, 421 U.S. at 209).

In this case, the Government did not "acquiesce[] in contrary findings" on the issue of its ability to offer evidence sought in the Subpoena notwithstanding the validity of the Warrant. Steagald, 421 U.S. at 209. Indeed, as discussed above, although Judge Karas acknowledged that the Order created a class of documents that appeared to be simultaneously admissible and inadmissible, he did not resolve that issue - as is evident from Judge Karas' and the parties' statements following issuance of the Order.

In addition, throughout the instant litigation, the Government has "raise[d] questions" relating to the admissibility of documents sought by the Subpoena - including the Challenged Documents - "in a timely fashion . . . ." Id. Indeed, nearly five months prior to issuance of the Order, the Government asserted that such documents were admissible notwithstanding the validity of the Warrant. In addition, following issuance of the Order, the Government promptly and vigorously asserted the argument that it may use the Challenged Documents at trial on the basis of the Subpoena and the two exceptions to the exclusionary rule discussed herein.*fn7

Thus, this Court rejects Defendants' contention that the Government has waived its ability to assert arguments relating to the admissibility of the Challenged Documents. The fact that, prior to issuance of the Order, neither party nor the Court fully anticipated the contours of the Order - which created a class of Challenged Documents that were simultaneously suppressed under the Warrant and deemed discoverable under the Subpoena -- does not establish that any party should "lose its right" to address issues arising from the Order. See id.

Defendants cite United States v. Nezaj, 668 F. Supp. 330, 334 (S.D.N.Y. 1987), in support of their assertion that "the Government's arguments in favor of admitting the Challenged Documents "must be rejected as untimely." (Tanaka Mem. at 6.) However, in Nezaj, the district court denied, in part, the Government's request to reopen a suppression hearing in order to present previously undisclosed "facts that were known to [the Government] at the time of the initial hearing through . . . witnesses who were available to the government at the time of the hearing," and to raise "a legal issue that the government chose not to raise at the prior hearing." Nezaj, 668 F. Supp. at 334.

Here, by contrast, the Government does not seek to reopen the suppression hearing, nor does it seek to present additional facts or a new legal theory relating to a suppression issue already decided by the Court. Instead, the Government seeks only to make arguments relating to an unresolved issue that was not addressed in Judge Karas' Order regarding the prior motions to suppress and to quash.

In addition, there is no indication in this case that the Government elected to omit the arguments at issue during the prior suppression hearing. Rather, as discussed above, the Government raised the issue of the admissibility of documents sought in the Subpoena prior to issuance of the Order, and presented arguments specifically tailored to the Challenged Documents shortly after the Order created that class of documents. Thus, the holding of Nezaj is inapplicable to the instant case, wherein the Government, rather than asking this Court to reopen the suppression hearing or to reconsider the suppression order, merely seeks a determination as to an issue arising from, and left unresolved by, the initial suppression order in this case.

Accordingly, because Defendants have failed to present any persuasive arguments or authority in support of their waiver claim, the Government may invoke the inevitable discovery and independent source doctrines in support of the admissibility of the Challenged Documents.

2. Admissibility of the Challenged Documents

The Government contends that the Challenged Documents may be offered at trial based on the inevitable discovery and the independent source exceptions to the exclusionary rule. For the reasons set forth below, the Court concurs.

a. Inevitable Discovery

i. Legal Standard

The doctrine of inevitable discovery provides that "evidence obtained during the course of an unreasonable search and seizure should not be excluded `if the government can prove that the evidence would have been obtained inevitably' without the constitutional violation." United States v. Heath, 455 F.3d 52, 55 (2d Cir. 2006) (citing Nix v. Williams, 467 U.S. 431, 447 (1984), and United States v. Eng, 997 F.2d 987, 990 (2d Cir. 1993) (hereinafter, "Eng II")). "In essence, the inevitable discovery doctrine's application turns on a central question: Would the disputed evidence inevitably have been found through legal means `but for' the constitutional violation? If the answer is `yes,' the evidence seized will not be excluded." Id.; see also United States v. Mendez, 315 F.3d 132, 137 (2d Cir. 2002). Thus, illegally-obtained evidence will be admissible only where the Court can find "with a high degree of confidence . . . that each of the contingencies necessary to the legal discovery of the contested evidence would be resolved in the government's favor." Heath, 455 F.3d at 60. The Government bears the burden of proving by a preponderance of the evidence that discovery of the challenged items "would inevitably have happened," id. at 58 n.6 (citing United States v. Cabassa, 62 F.3d 470, 474 (2d Cir. 1995)), by pointing to "demonstrated historical facts capable of ready verification or impeachment," United States v. Eng, 971 F.2d 854, 859 (2d Cir. 1992) (hereinafter, "Eng I") ("[P]roof of inevitable discovery `involves no speculative elements . . . .'") (quoting Nix, 467 U.S. at 444 n.5) (emphasis in original).

In Eng I, the Second Circuit specifically addressed the circumstances under which the Government may "rely upon the subpoena power" as a means of "proving inevitable discovery." 971 F.2d at 860. The Second Circuit advised district courts to take "[p]articular care" in assessing the applicability of the inevitable discovery doctrine where, as here, the Government seeks to rely upon a subpoena "issued after or at the time of the unlawful search"; the court was especially concerned with the need to guard against the use of such subpoenas "as an after the fact `insurance policy' to `validate' an unlawful search under the inevitable discovery doctrine." Id. at 861 (quoting Center Art Galleries-Hawaii, Inc. v. United States, 875 F.2d 747, 754-55 (9th Cir. 1989), overruled on other grounds, J.B. Manning Corp. v. United States, 86 F.3d 926, 927 (9th Cir. 1996)). Thus, the Second Circuit directed district courts to conduct a two-step "inevitable discovery analysis" in such situations. Id.

First, the district court must look to "the progress of the investigation at the time of the government misconduct." Id. at 861. Specifically, to satisfy this step, the Government must establish that there was an "active and ongoing investigation" of the target of the unlawful search at the time of that search. Id. at 862; see Nix, 467 U.S. at 444. Thus, the Government must establish that the investigation was not "`trigger[ed]' . . . by the information unlawfully gained by the illegal search," Eng II, 997 F.2d at 992 (quoting Eng I, 971 F.2d at 871) (additional internal quotation marks and citation omitted), but, rather, that "`[t]he alternate means of obtaining the [challenged] evidence" was, "at least to some degree, imminent, if yet unrealized,'" at the time of the unlawful search. Eng I, 971 F.2d at 861 (quoting United States v. Falley, 489 F.2d 33, 41 (2d Cir. 1973) and United States v. Cherry, 759 F.2d 1196, 1205 n. 10 (5th Cir. 1985)).

Second, with regard to "each particular piece of evidence" that the Government asserts would have been inevitably discovered, the district court must "specifically analyze and explain how, if at all, discovery of that piece of evidence would have been more likely than not inevitable absent the [unlawful] search . . . ." Eng I, 971 F.2d at 862 (citing Nix, 467 U.S. at 444) (internal quotation marks omitted). Thus, to satisfy this second step of the inquiry, the Government must show by a preponderance that "both issuance of the subpoena, and a response to the subpoena producing the evidence in question, were inevitable." Eng I, 971 F.2d at 860.

Ultimately, "where the government can demonstrate a substantial and convincing basis for believing that the requisite information would have been obtained by subpoena . . . there is no reason why the government may not rely upon the subpoena power as one way it might meet the burden of proving inevitable discovery by a preponderance of the evidence." Id.

ii. Analysis

It is undisputed that the Challenged Documents were illegally seized pursuant to the invalid portions of the Warrant. However, the Government asserts that it should be permitted to offer the Challenged Documents at trial because they would have been inevitably discovered pursuant to the lawful portions of the Subpoena even if the "government misconduct" at issue in this action had "never occurred." Id. at 862.

As an initial matter, the Court specifies the government misconduct at issue here. At this stage of the case, it is clear that only certain portions of the Warrant were unlawful. Specifically, in accord with Judge Karas' findings in the Order, only six of the original Warrant's seventeen paragraphs are completely invalid, "several are entirely valid, and the majority of those that are modified are done so only slightly." (See Order at 66.) Therefore, for the purposes of the inevitable discovery analysis in this case, the relevant government misconduct is the Government's execution of those portions of the Warrant that were later found to be invalid. Thus, in order to establish the applicability of the inevitable discovery doctrine, the Government must show by a preponderance of the evidence that the Challenged Documents would have been inevitably discovered pursuant to the Subpoena if the Government had executed a warrant that omitted the invalid portions of the original Warrant.

However, Defendants argue that the Subpoena would not have issued - and, in turn, the Challenged Documents would not have been inevitably discovered - absent the invalid portions of the Warrant. (See Tanaka Mem. at 7-8; Tanaka Reply Mem. at 6-8.) Specifically, Defendants assert that the overbroad provisions of the Warrant and the prospect of the forthcoming search spurred Amerindo's counsel, Mr. Licker, to ask the Government whether it intended to issue a grand jury subpoena, and that Mr. Licker's question actually prompted the Government to issue the Subpoena. (Tanaka Mem. at 6-8.) Therefore, in Defendants' view, because the unlawful search triggered - by means of Mr. Licker's question - the issuance of the Subpoena, the Challenged Documents would not have been discovered absent the Warrant's invalid provisions.

For the following reasons, the Court finds that the Government has met its burden of establishing the inevitable discovery of the Challenged Documents. Specifically, the Government has established by a preponderance of the evidence that (1) the issuance of the Subpoena was not "triggered" by information unlawfully gained from Amerindo; (2) the Subpoena was the product of an active and ongoing investigation; (3) absent the unlawful portions of the Warrant, the Government's investigation would have inevitably prompted Mr. Licker to raise the issue of a grand jury subpoena, which, in turn, would have caused the Government to issue the Subpoena; and (4) Amerindo would have inevitably responded to the portions of the Subpoena calling for production of the Challenged Documents.

First, the Court finds that the Subpoena was not issued on the basis of information unlawfully gained from Amerindo. As an initial matter, the Court notes that, in addressing this point, Defendants have mischaracterized the question before the Court. The critical inquiry is not whether the Government can establish the absence of any causal connection between the initial search and the Government's subsequent decision to issue a subpoena. (See Tanaka Reply Mem. at 6.) Rather, the Government's burden is to establish by a preponderance that it would have inevitably discovered the Challenged ...


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