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United States of America v. Michael Metter

May 17, 2011

UNITED STATES OF AMERICA, PLAINTIFF,
v.
MICHAEL METTER, DEFENDANT.



The opinion of the court was delivered by: Dora L. Irizarry, United States District Judge:

MEMORANDUM AND ORDER

The instant action arises out of a multi-defendant indictment alleging that defendants participated in a fraudulent scheme to publicly report false and materially overstated sales figures to create artificial demand for, and increase the share price and trading volume of, the common stock of Spongetech Delivery Systems, Inc. ("Spongetech"). Metter is charged with conspiracy to commit securities fraud, in violation of 18 U.S.C. §§ 371, 3551 et seq. (Count 1), conspiracy to commit obstruction of justice, in violation of 18 U.S.C. §§ 371, 3551 et seq. (Count 2), securities fraud, in violation of 15 U.S.C. §§ 78j(b), 78ff, 18 U.S.C. §§ 2, 3551 et seq. (Count 3), obstruction of justice, in violation of 18 U.S.C. §§ 2, 1505, 3551 et seq. (Count 4), conspiracy to commit money laundering, in violation of 18 U.S.C. §§ 1956(h), 3551 et seq. (Count 5), and perjury, related to Metter's testimony before the Securities and Exchange Commission ("S.E.C."), in violation of 18 U.S.C. §§ 2, 1621(1), 3551 et seq. (Count 9).

Metter moves to (i) dismiss the counts against him for improper venue (see Metter Motion to Dismiss, Doc. Entry No. 128), and (ii) suppress the evidence obtained pursuant to search warrants executed at his home and Spongetech's office, as well as a search of his personal email account (see Metter Motion to Suppress, Doc. Entry No. 129).*fn1 The government filed a consolidated opposition to both motions. (See Government Opposition, Doc. Entry No. 143.) The Court, likewise, has consolidated the two motions. As set forth more fully below, Metter's motion to dismiss for improper venue is denied, without prejudice to renew at trial, and Metter's motion to suppress evidence is granted.

DISCUSSION

I. Metter's Motion to Dismiss for Improper Venue

Metter moves to dismiss Counts 1-5, and 9 of the Superseding Indictment (Superseding Indictment ("S.I."), Doc. Entry No. 38), on the ground that the government has failed to establish that venue is proper in the Eastern District of New York. In Counts 1-5, the Superseding Indictment states that the conduct at issue occurred "within the Eastern District of New York and elsewhere." (S.I. ¶¶ 24-25, 27, 30, 32, 34.) Metter's pre-trial challenge to the appropriateness of venue as to Counts 1-5 is frivolous. "The law of this Circuit is clear that the Government's burden is satisfied with regard to pleading venue by alleging that criminal conduct occurred within the venue, even if phrased broadly and without a specific address or other information." United States v. Bronson, 2007 WL 2455138, *4 (E.D.N.Y. Aug. 23, 2007) (denying defendant's motion to dismiss for improper venue as the indictment states that "conduct occurred in the Eastern District of New York"); see also United States v. Bellomo, 263 F. Supp. 2d 561, 571 (E.D.N.Y. 2003) ("[T]he indictment, alleging on its face that the offenses occurred 'within the Eastern District of New York and elsewhere,' suffices to sustain it against this pretrial attack on venue."); United States v. Szur, 1998 WL 132942, *9 (S.D.N.Y. Mar. 20, 1998) ("[O]n its face, the Indictment alleges that the offense occurred 'in the Southern District of New York and elsewhere,' which is sufficient to resist a motion to dismiss.").

Should the government fail to establish venue by a preponderance of the evidence at trial, Metter is not precluded from renewing his motion at the conclusion of the government's case. See Bronson, 2007 WL 2455138, at *4 (explaining the difference between the government's burden at pleading and at trial, and permitting the defendant to renew his motion to dismiss for lack of venue at the conclusion of the government's case, if the government failed to establish venue by a preponderance of the evidence). Accordingly, Metter's motion to dismiss with respect to Counts 1-5 is denied without prejudice to renew at the conclusion of the government's case.

Metter also moves to dismiss Count 8, the perjury charge stemming from his testimony before the S.E.C. On October 5, 2009, the S.E.C. suspended trading of Spongetech shares. On October 13, 2009, the S.E.C. deposed Metter in the District of Columbia regarding Spongetech's recent activity in the financial markets. (S.I. ¶ 47.) In March 2010, the United States Attorney's Office for the Eastern District of New York opened its investigation into Spongetech, after preliminary investigations were initiated by the Internal Revenue Service ("I.R.S.") and the Federal Bureau of Investigation ("F.B.I.") in November 2009. (See Gov't Letter dated Feb. 10, 2012, Doc. Entry No. 207.) On May 3, 2010, the United States Attorney's Office for the Eastern District of New York filed a sealed complaint against Michael Metter and Steven Moskowitz. (See Complaint, Doc. Entry No. 1.) On May 5, 2010, the S.E.C. filed a complaint against Spongetech, Metter, Moskowitz, other individuals associated with Spongetech, and other entities controlled by the individual defendants. (See S.E.C. v. Spongetech, et al., 10-CV- 2031(DLI)(JMA) Complaint, Doc. Entry No. 1.) Both the civil and criminal complaints alleged wrongdoing from 2007 to the date of filing.

The record makes it clear that Metter was deposed in the District of Columbia, at the behest of S.E.C. attorneys located in that District, prior to the commencement of the criminal and civil investigations undertaken by the government in this District. As set forth above, the government's burden to establish venue at the pleadings phase is less arduous. In United States v. Clark, 1987 WL 13273 (S.D.N.Y. Jun. 30, 1987), the court denied a motion to dismiss for improper venue under very similar circumstances. In that case, the defendant was deposed by the S.E.C. in the District of Columbia before the government filed charges in the Southern District of New York, yet, the Court concluded that venue was proper in the Southern District. Id. at *4. In denying the motion to dismiss, the Court applied the substantial contacts analysis set forth in United States v. Reed, 773 F. 2d 477, 481 (2d Cir. 1985) (explaining that a court conducting venue analysis should consider "the site of the defendant's acts, the elements and nature of the crime, the locus of the effect of the criminal conduct, and the suitability of each district for accurate fact finding"). As set forth below, the government has satisfied the Reed substantial contacts factors.

In the instant action, Metter testified to the trading of Spongetech stock, which occurred in this District and elsewhere. The effect of the crime was felt in this District as several victims have submitted letters detailing the financial losses that they incurred in this District as a result of purchasing Spongetech stock. Further, the S.E.C. and the government filed charges in this District, at least in part, as a result of the S.E.C.'s depositions of defendant Metter and other co-defendants. Metter's allegedly perjured testimony would have impeded the government's and the S.E.C.'s investigations in this District. These considerations lead the Court to conclude that, at this stage in the litigation, venue is proper in this District. Accordingly, Metter's motion to dismiss with respect to Count 8 is denied without prejudice to renew at the conclusion of the government's case.

II. Metter's Motion to Suppress

As set forth above, the government filed a sealed criminal complaint against Metter on May 3, 2010. The S.E.C. filed a civil complaint against Metter on May 5, 2010. The government then sought and executed several court authorized search warrants, which are the subject of defendant's motion to suppress certain digital evidence.

A. Background

On May 4, 2010, Special Agent Thomas McGuire of the F.B.I. submitted an affidavit in support of an application for a warrant to search Metter's home, located at 1 Tinker Lane, Greenwich, Connecticut 06830. (See McGuire Affidavit for Application to Search Metter's Home ("McGuire Home Aff."), attached as Ex. 3 to the Affidavit of Maranda Fritz ("Fritz Aff."), Doc. Entry No. 132.) The Affidavit set forth detailed information regarding the investigation and incorporated the Complaint by reference. (Id.) The Affidavit indicated that Metter used computers from his home to further the fraudulent scheme and that agents had recovered numerous computer-generated documents related to the scheme from the Metters' household trash.*fn2 (Id. ΒΆΒΆ 48-51.) The Affidavit requested permission to "search, copy, image and seize the ...


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