The opinion of the court was delivered by: Robert P. Patterson, Jr., U.S.D.J.
By motion dated June 1, 2011, Defendant Michael Lamond ("Lamond") moved to suppress nineteen telephone conversations between himself and Defendant Aron Chervin intercepted by the Federal Bureau of Investigation ("FBI") pursuant to court-authorized wiretaps. Defendant argues that the communications are protected by the attorney-client privilege because Aron Chervin was a client. Subsequent to Defendant Lamond's filing of this motion, Defendants Aron Chervin, Valiantsina Lahun, and Judson Just joined the motion. On July 1, 2011, the Government responded in opposition to Defendant's motion. On July 14, 2011, Defendant submitted a reply. For the reasons that follow, the motion to suppress is denied.
On October 6, 2010, a Grand Jury indicted Defendants Aron Chervin, et al., charging Defendants with conspiracy to engage in a scheme to commit mail fraud and healthcare fraud, 18 U.S.C. § 1349, conspiracy to sell confidential patient information, 18 U.S.C. § 371, and conspiracy to commit money laundering, 18 U.S.C. § 1956(h). (Indictment ("Indict.") dated October 7, 2010.) The indictment alleges that the Defendants' scheme sought to "systematically defraud no-fault insurance carriers by submitting fraudulent claims for medical services and equipment." (Id. ¶ 1.) In furtherance of the scheme, patients*fn1 were recruited to fraudulent clinics nominally controlled by a medical professional but ultimately operated by Defendants. (Id. ¶ 6, 17.) The alleged conspirators recruited patients who they knew were recently involved in car accidents and paid hospital employees to provide patient information of individuals recently involved in accidents. (Id. ¶ 13.) Once at the clinic, participating doctors would subject the patients to excessive, unnecessary, or fraudulent tests to generate false claims for treatment and equipment to be submitted to the no-fault insurance providers. (Id. ¶ 7.) Additionally, Defendants are charged with creating wholesale and retail shell corporations to perpetuate the fraudulent sale of Durable Medical Equipment ("DME") to obtain inflated reimbursement from no-fault insurance providers, (Id. ¶ 9.), and financing their scheme through the sale of fraudulent receivables of the clinics to investors who benefitted from the inflated reimbursement generated by the fraud even though New York State prohibits medical professionals from sharing fees for medical services with non-medical professionals. (Id. ¶ 20.) These sophisticated schemes also utilized the services of lawyers to represent patients, to facilitate payments, and to prevent the insurance companies from detecting the possibility of fraud. (Id. ¶ 21.)
The indictment also alleges that the scheme involved billing for invoices generated by the medical professional corporations and submitted to no-fault insurers through the Law Office of Akiva Ofshtein, P.C., which employed Defendant Lamond and Defendant Vadim Chervin. (Id. ¶¶ 6, 21.) Defendant Lamond is allegedly an attorney licensed to practice in New York State and an expert in the submission of no-fault insurance claims. (Id.) The indictment alleges that Lamond's services were used to draft contracts with financiers and to prevent "unwanted scrutiny" from insurers. (Id.) Furthermore, the indictment alleges that Lamond allowed use of his attorney's escrow account to receive monies from financiers purchasing the inflated receivables. (Id. ¶ 22.) This arrangement allowed members of the conspiracy to shield the fact that the insurance payments were received by certain members of the conspiracy rather than the relevant medical corporation. (Id.)
II. The Attorney-Client Privilege and The Crime Fraud Exception
The rationale for the attorney-client privilege is "to encouragefull and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice." Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). Clients must feel free to disclose to their attorneys a full and fair rendering of their past wrongdoings so that attorneys will best be able to provide competent and skillful legal assistance. See Fisher v. United States, 425 U.S. 391, 403 (1976). The privilege, however, is not an unbridled license which protects all communications between attorney and client, and thus there are exceptions to the general rule. One of these exceptions is commonly referred to as the crime-fraud exception. Under this exception, the privilege "ceases to operate at a certain point, namely, where the desired advice refers not to prior wrongdoing, but to future wrongdoing." United States v. Zolin, 491 U.S. 554, 562-63 (1989) (quoting 8 Wigmore, § 2298, p. 573) (emphasis in original). Nor can the privileged communications between an attorney and client be carried on with the purpose of furthering or enabling a crime or fraud. See In re Richard Roe, Inc., 68 F.3d 38, 40 (2d Cir. 1995).
It is well-settled that the party asserting the attorney-client privilege bears the burden of establishing that all the elements of the privilege are present. See United States v. Int'l Bhd. of Teamsters, 119 F.3d 210, 214 (2d Cir. 1997); United States v. Schwimmer, 892 F.2d 237, 244 (2d Cir. 1989). Defendant Lamond contends that an attorney-client relationship had been established between himself and Defendant Aron Chervin. The Government argues that it is not aware of any retention letter, notice of appearance, legal bills, or any such supporting documents that would indicate an attorney-client relationship. (Government's Omnibus Memorandum of Law in Opposition to Pre-trial Motions ("Gov. Mem."), dated July 1, 2011 at 46.) Lamond does not dispute this point, but rather argues that the contents of challenged interceptions clearly demonstrate the existence of an attorney-client relationship with Aron Chervin. (Suppression Hear'g Transcript ("Tr.") at 13.)
The attorney-client privilege is found to exist "(1) where legal advice of any kind is sought (2) from a professional legal advisor in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal advisor ." In re Grand Jury Subpoena Duces Tecum Dated September 15, 1983, 731 F.2d 1032, 1037 (2d Cir. 1984). Lamond contends that he was providing "legitimate legal services to his client by consulting with him concerning financing, no-fault collections, and arbitrations." (Defendant's Memorandum of Law in Support of Motion to Suppress ("Def.'s Mem.") dated June 1, 2011 at 4.) The Court will assume as true Lamond's points that an attorney-client privilege was established with Defendant Aron Chervin.
A. The Government Bears the Burden of Establishing the Crime-Fraud Exception
Assuming Defendant Lamond has met the burden of establishing a privilege, the Government contends that Lamond must show that the communications were not made for the purposes of committing a crime or fraud. See In re Richard Roe, Inc., 68 F.3d at 40. Defendants argue, however, that the Government bears the burden of proof in establishing the crime-fraud exception. (Def.'s Mem. at 4.) The Second Circuit has held that the party seeking to invoke the crime-fraud exception must prove there is a "factual basis for a showing of probable cause to believe that a fraud or crime has been committed and that the communications in question were in furtherance of the fraud or crime." United States v. Jacobs, 117 F.3d 82, 87 (2d Cir. 1997) (citing In re John Doe, Inc., 13F.3d 633, 637 (2d Cir. 1994)); In re Grand Jury Subpoena Duces Tecum Dated September 15, 1983, 731 F.2d 1032, 1039 (2d Cir. 1984). The fraudulent objective of the scheme, however, "need not be established definitively; there need only be presented a reasonable basis for believing that the objective was fraudulent." In re Grand Jury Subpoena Duces, 731 F.2d at 1039.
B. The Crime-Fraud Exception Does Not Require an Attorney to Knowingly Participate in the Crime
Defendant Lamond argues that he is "clearly providing legitimate legal services to his client by consulting with him concerning financing, no-fault collections, and arbitrations." (Def.'s Mem. at 4.) However, the attorney-client privilege will not attach to any communications in furtherance of a crime or fraud regardless of the attorney's lack of knowledge that he is being consulted in furtherance of that crime or fraud. See Clark v. United States, 289 U.S. 1, 15 (1933) ("Nor does the loss of the privilege depend upon the showing of a conspiracy, upon proof that client and attorney are involved in equal guilt. The attorney may be innocent, and still the guilty client must let the truth come out."); In re Grand Jury Proceedings, 674 F.2d 309, 310 (4th Cir. 1982); United States v. Gotti, 771 F. Supp. 535, 543 (E.D.N.Y. 1991). Therefore, Lamond's knowledge of whether a fraudulent scheme was afoot is not relevant to the application of the crime-fraud exception to Lamond's interactions with Aron Chervin. What is relevant is the nature of the Government's evidence of Aron Chervin's actions which Lamond assisted.
C. The Government has Demonstrated Probable Cause that Defendant Aron Chervin Utilized Mr. Lamond's Services to Further His Fraudulent Scheme
To establish that communications were in furtherance of the fraudulent scheme, the Government must be able to demonstrate that the "particular communication with counsel or attorney work product was intended in some way to facilitate or conceal the criminal activity." In re Richard Roe, Inc. v. Richard Roe Inc. et. al., 168 F.3d 69, 71 (2d Cir. 1999) (emphasis in original). However, communications that merely relate to the fraudulent scheme will not trigger the crime-fraud exception to the attorney-client privilege. See Jacobs, 117 F.3d at 88. The intercepted calls demonstrate that Aron Chervin used the services of Lamond and the Law Office of Akiva Ofshtein, P.C., to (1) submit fraudulent bills and collect money from no-fault insurers, (2) draft contracts with doctors and investors in furtherance of the fraudulent scheme, and (3) launder monies garnered through the fraudulent scheme.
III. The Applicable Wiretaps
The Government's memorandum of law in opposition to Lamond's motion relied on selected excerpts from FBI agents' affidavits in support of authorizations for the electronic surveillance of Aron Chervin's cell phone to establish probable cause that Aron Chervin was engaged in fraudulent criminal conduct. At oral argument, the Court requested that the applications cited be submitted in their entirety so that the Court could verify that the Government's probable cause contentions were based on events prior to the Government receiving authority from courts authorizing the agents to record telephone calls between Aron Chervin and Lamond which the government previously minimized.*fn2 The Government has provided these affidavits dated May 6, 2010, and June 28, 2010.*fn3
On May 6, 2010, the Hon. Lawrence M. McKenna signed an electronic surveillance authorization pursuant to 18 U.S.C. § 2518 to intercept telephone calls originating from the telephone number subscribed to by Defendant Aron Chervin (Application in Support of Electronic Interception dated May 6, 2010 ("05/06/10 Application"). The May 6, 2010, order instructed agents to "avoid infringing upon any attorney-client privilege or other recognized privileges." (Affidavit of Special Agent Jeffrey S. Koch in Support of Application dated May 6, 2010 ("Koch Aff. 05/06/10") ¶ 64.) In support of the application, Special Agent ("SA") Koch stated that, based on toll analysis, he was aware that Defendant Aron Chervin was making frequent phone calls to the Law Office of Akiva Ofshtein P.C. where Defendant Vadim Chervin and Defendant Michael Lamond were employed. (Id. ¶ 39.) The Government, upon learning that Lamond was an attorney, took measures to minimize automatically interceptions of his cellular communications with Chervin. (Gov. Mem. at 34.) However, based on conversations intercepted from the May 6, 2010, order, the Government provided notice with its renewal application to the Hon. Sidney H. Stein dated June 28, 2010, that it would begin to intercept conversations between Defendant Lamond and Defendant Aron Chervin. (Id. at 35.) The Government stated that it believed that the conversations between Lamond and Chervin were in furtherance of the no-fault insurance fraud being perpetrated and therefore were subject to the crime-fraud exception to the attorney-client privilege. (Id.) As a prophylactic measure, the Government's letter to Judge Stein described the employment and procedures of a "wall team" to intercept calls between Chervin and Lamond. (Id. at 32-34.) This "wall team" would include an Assistant United States Attorney and a designated FBI agent who would not participate in the investigation beyond their duties on the "wall team." (Id.) Subsequently, the Government applied for and received extensions of the electronic surveillance authorization on June 28, 2010, July 29, 2010, and September 8, 2010.*fn4
(Id. at 35-36.) Accordingly, the Court reviewed the Government's applications for wiretap authorizations stating the knowledge obtained by the Government prior to June 28, 2010, to determine if there was probable cause prior to June 28, 2010, for the Government to conclude that Aron Chervin was engaged in healthcare fraud and was utilizing Michael Lamond in furtherance of the fraud.
A. The May 6, 2010, Affidavit of SA ...