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United States v. Wey

United States District Court, S.D. New York

June 13, 2017

United States of America,
v.
Benjamin Wey, Defendant.

          OPINION & ORDER

          ALISON J. NATHAN UNITED STATES DISTRICT JUDGE

         Defendant Benjamin Wey faces an eight-count indictment charging him with securities fraud, wire fraud, conspiracy to commit securities and wire fraud, money laundering, and failure to disclose beneficial ownership of publicly trades companies. Before the Court is Wey's motion to suppress evidence seized during Government searches of his residence and the offices of his consulting firm, New York Global Group, Inc., both conducted on January 25, 2012. For the reasons set forth below, Wey's motion is GRANTED.

         I. Background

         A. The Indictment

         Wey is charged in an eight-count indictment returned on September 8, 2015. Dkt. No. 2 (the "Indictment"). The Indictment alleges that between approximately 2007 and 2011, Wey, along with co-Defendant Seref Dogan Erbek (who remains at large) and unindicted coconspirators known and unknown, orchestrated a scheme whereby Wey - through various nonparty entities, family members, and associates (the "Nominees") - covertly amassed beneficial ownership of substantial portions of the equity stock of certain publicly traded companies (the "Issuers"), manipulated the market price of the Issuers' stock, liquidated his holdings at artificially inflated prices, and then laundered millions of dollars in ill-gotten proceeds. See, e.g., Indictment ¶¶ 7, 13, 18-22.

         Specifically, according to the Indictment, Wey secretly caused the Nominees to acquire, on his behalf, substantial portions of the shares of certain U.S.-based over-the-counter-traded shell companies and then, through his consulting firm New York Global Group, Inc. ("NYGG") and its alleged affiliate in Beijing, China, facilitated so-called "reverse merger" transactions by which China-based operating companies merged into those shell companies, thus forming new publicly traded corporations - the Issuers. Id. ¶¶ 8-12. The Government alleges that the Nominees acquired and retained, for Wey's benefit, stock in the Issuers by virtue of their ownership of the target shell companies, and that these holdings together constituted more than five percent of the Issuers' outstanding shares. Id. ¶¶ 7, 13. Because Wey, among other things, purportedly exercised investment authority over the shares held by the Nominees, he was required to disclose his beneficial ownership under Section 13(d) of the Securities Exchange Act of 1934 and Rule 13d-l promulgated thereunder within ten days of the acquisition of shares in excess of five percent. Id. ¶ 13. The Government alleges that Wey was "well aware" of this reporting requirement but intentionally failed to file the required disclosures in order to conceal his ownership from the investing public. Id. ¶ 14.

         Wey also, according to the Indictment, caused several of the Issuers, including SmartHeat, Inc. ("SmartHeat"), Deer Consumer Products, Inc. ("Deer"), and CleanTech Innovations, Inc. ("CleanTech"), to apply for listings on the Nasdaq. Id. ¶-15. In order to secure approval of these applications, Wey allegedly engaged in deception to artificially satisfy Nasdaq's so-called "round-lot" shareholder requirement - i.e., the requirement that every listed issuer has at least 300 shareholders each owning 100 or more shares of common stock. Id. ¶¶ 16-17. In particular, Wey purportedly facilitated deceptive transfers of shares of Issuer stock from Nominees to other Wey confederates, as well as issuances of round-lot blocks of shares in the names of individuals who never actually received such shares or were otherwise unaware of their ownership. Id. ¶¶ 15 -17.

         After successfully getting the Issuers listed on Nasdaq, the Government alleges, Wey proceeded to manipulate the demand for and price of Issuer stock. This was purportedly accomplished by, among other things: (i) causing Manhattan-based retail brokers to solicit their customers to purchase common stock of the Issuers, often on margin, while at the same time actively discouraging the sale of such stock; (ii) instructing Erbek to maintain the share prices of certain Issuers' stock held in various Nominees' accounts; and (iii) facilitating match trades in the Issuers' stock involving Nominees and/or other Wey confederates. Id. ¶¶ 18-19.

         Contemporaneous with this market manipulation scheme, the Government alleges, Wey caused certain Nominees to sell shares of the Issuers' stock at artificially inflated prices. Id. ¶ 20. Wey then purportedly laundered the proceeds of these sales by causing them to be transferred from accounts located in the U.S. to Nominees' accounts located overseas, including in Switzerland and Hong Kong, before being repatriated back to the U.S. and into accounts controlled by Wey and his wife or otherwise held for Wey's benefit. Id. ¶¶ 20-22.

         Wey is charged with one count of conspiracy to commit securities fraud and wire fraud under 18 U.S.C. § 371; one count of securities fraud under Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, 15 U.S.C. §§ 78j(b) & 78ff, 17 C.F.R. § 240.10b-5; one count of securities fraud under 18 U.S.C. § 1348; one count of wire fraud under 18 U.S.C. § 1343 ("Count Four"); two counts - concerning Deer and CleanTech stock, respectively - of failure to disclose ownership in excess of five percent of a covered class of equity securities under Section 13(d) of the Exchange Act and Rule 13d-l, 15 U.S.C. §§ 78m(d) & 78ff, 17 C.F.R. § 240.13d-l; one count of money laundering under 18 U.S.C. § 1956(a)(1)(B)(i); and one count of money laundering under 18 U.S.C. § 1956(a)(2)(A). See Indictment ¶¶ 23-40.

         B. The Search Warrant Affidavits

         1. Affidavit Concerning NYGG's Offices

         On January 24, 2012, Special Agent Matthew F. Komar of the Federal Bureau of Investigation ("FBI") swore out an affidavit in support of an application for a warrant to search NYGG's Manhattan offices located at 40 Wall Street, Suite 3800. See July 8, 2016 Declaration of Matthew F. Komar Ex. 1, Dkt. No. 54-1 (the "Komar Affidavit" or "Komar Aff"). The Komar Affidavit described an ongoing FBI investigation of Wey, Wey's sister (a Chinese citizen apparently employed by NYGG or its purported Beijing-based counterpart), and NYGG itself- which it characterized as a "corporate advisory firm" founded by Wey in approximately 2004 that specialized in "introducing middle-market Chinese operating companies to the U.S. capital markets." See, e.g., Komar Aff. ¶¶ 2-7, 16. It asserted that there was probable cause to believe that fruits, instrumentalities, and evidence of violations of the federal securities, mail, and wire fraud laws were located within the subject premises. See, e.g., Id. ¶¶ 2-7.

         Based on the investigation to date, including information obtained from current and former NYGG employees, the Komar Affidavit detailed a suspected "fraud and market manipulation scheme" perpetuated by Wey, acting through NYGG and other entities. See, e.g., Id. ¶¶ 4-14. Komar's description of the purported scheme broadly tracked, in substantial measure, the allegations set forth in the Indictment and discussed above. As outlined in the Komar Affidavit, the scheme involved Wey retaining undisclosed beneficial ownership of Issuers created through reverse merger transactions facilitated by NYGG and then artificially inflating the Issuers' round-lot shareholder bases to secure Nasdaq listings and manipulating demand for the Issuers' stock by encouraging a "a hand-picked team of retail stock brokers" to "aggressively solicit purchases" of the Issuers' securities. Wey would then, according to the Affidavit, effectuate the sale of Nominee-held shares at inflated prices and launder the proceeds, including through fund transfers to Wey's wife. See, e.g., Id. ¶¶ 8-14, 18-29.

         Notwithstanding its length, the Komar Affidavit is notable for its focus on Wey's connection to a handful of specific companies. Like the Indictment, the Komar Affidavit principally addressed SmartHeat, Deer, and CleanTech. Id. ¶¶ 11-12, 18-20, 35-36. With respect to SmartHeat and Deer, the Affidavit discussed particular purported misrepresentations made by the Issuers, and by Wey, to Nasdaq in the course of the listing application process and described serial transactions by which Wey allegedly inflated the Issuers' round-lot shareholder bases in 2008 and 2009. Id. ¶¶ 18-19. It further set out alleged market manipulation tactics undertaken in 2009 through 2010 by the broker group over which Wey purportedly exercised influence, including improper high-pressure promotion of Issuer securities and misrepresentations concerning the future value of the stocks. Id. ¶¶ 20-25. A $350, 000 kickback allegedly paid to the broker group in connection with its promotion of Deer, at least, was described in some detail. Id. ¶ 26. The Affidavit also discussed, to some extent on a transaction-level basis, the Nominees' sales, in 2009 and 2010, of large blocks of Issuer shares at purportedly inflated prices and the wiring of the sale proceeds to accounts linked to Wey * confederates and family members in Switzerland and Hong Kong and, ultimately, back to the U.S. Id. ¶¶ 27-29.

         As to CleanTech, the Affidavit described Wey's purported facilitation in 2010 and 2011 of the placement of Issuer stock with individuals and entities formerly used as Nominees with respect to Deer and SmartHeat. Id. ¶ 36. It also identified documents allegedly demonstrating Wey's indirect control over CleanTech, and discussed Nasdaq's decision to delist CleanTech based on its alleged failure to disclose materials revealing its financial connection to Wey.[1] Id. The Affidavit further recounted information from an FBI source within NYGG suggesting that Wey facilitated CleanTech management's preparation of inflated revenue forecasts, and identified a pattern of active trading in CleanTech stock by Wey's alleged retail broker team. Id.

         Of note, the Komar Affidavit also identified by name dozens of individuals and entities potentially involved, directly or indirectly, in Wey's suspected schemes. These included, among others, the U.S.-based broker-dealer team purportedly working at Wey's direction and several firms at which its members were employed, senior employees of the Issuers, suspected Nominees and other Wey associates and family members in both the United States and China, and NYGG personnel. Id. ¶¶ 12, 14, 18-19, 24, 26-29, 33, 36.

         The Affidavit also connected Wey, more briefly, to several other specific companies of evident interest to the Government. It described, for example, Wey's and NYGG's facilitation of a reverse merger transaction involving Bodisen Biotech, Inc., as well as that company's subsequent delisting by the then-American Stock Exchange for, among other things, failure to properly disclose its relationship with and payments to NYGG. Id. ¶ 17. It also recounted Wey's alleged involvement in an accounting fraud scheme perpetuated by AgFeed Industries, Inc., a publicly-traded company born of another reverse merger transaction purportedly facilitated by Wey, and large-scale sales of AgFeed stock by investors believed to be Wey Nominees. Id. ¶¶ 30-34. Finally, the Affidavit asserted that Wey exercised undisclosed control over Nova Lifestyle, Inc. (yet another product of a Wey-linked reverse merger transaction), that he wielded that control to effectuate share transfers to Nominees, and that he directed NYGG employees to improperly solicit purchases of the company's stock. Id. ¶ 37.

         In addition, the Komar Affidavit included a short section devoted to Wey's personal background and alleged history of participating in fraudulent activities, including within the securities industry. It asserted, among other things, that Wey was sanctioned by both the Oklahoma Department of Securities and then-National Association of Securities Dealers based on misconduct during Wey's time working as a registered investment adviser in Oklahoma in the mid to late 1990s and early 2000s. It further averred that Wey engaged in various forms of tax and other financial fraud and forgery during roughly the same period. Id. ¶ 15.

         Based on these submissions, and as discussed further below, the Komar Affidavit formally requested permission to seize from NYGG's offices twelve expansive categories of materials set forth on an appended exhibit, with the limitation that the materials concern at least one of an independently appended list of approximately 220 named individuals and entities believed to be in some way connected to Wey's purported scheme. Id. ¶¶ 35, 38-42, 46-47, Exs. A-B. It also sought court approval to seize, copy, and/or digitally image computers and related electronic equipment believed to contain such materials and to conduct offsite searches of the devices' contents. According to the Komar Affidavit, in view of the highly technical and specialized procedures and substantial time investment required to effect thorough searches of the potentially voluminous data contained within this equipment - including "deleted, concealed, or encrypted files - and extract relevant material while maintaining the integrity of the evidence, it would in many cases be impractical, if not impossible, to effectively do so onsite. Id. ¶¶ 43-47, Ex. C. As such, the Affidavit attached a third exhibit setting forth a proposed methodology for reviewing and seizing such equipment and, if necessary, executing offsite searches. Id. Ex. C.

         2. Affidavit Concerning Wey's Residence

         As discussed further below, during the course of the Government's search of the NYGG offices the following day, it decided to apply for a warrant to search the Manhattan apartment that Wey shared with his wife, Michaela, and their children (the "Wey Apartment"). Accordingly, on January 25, 2012, Special Agent Keith Garwood of the FBI swore out another affidavit. See July 8, 2016 Declaration of Matthew F. Komar Ex. 4, Dkt. No. 54-4 (the "Garwood Affidavit" or "Garwood Aff"). The Garwood Affidavit - which relied heavily upon and expressly incorporated by reference the Komar Affidavit - explained that FBI personnel had interviewed NYGG employees during the search of the firm's offices earlier that day and learned that Michaela Wey served as NYGG's "office manager" and "bookkeeper" but generally worked out of the Wey Apartment, where she would, among other things, perform accounting and payroll functions and mail checks. Garwood Aff. ¶¶ 2, 7-11. It also cited assertions in the Komar Affidavit that Wey caused certain Issuer stock certificates for new round-lot shareholders to be sent to the Wey Apartment, that certain Nominees had wired substantial sums of money to accounts held in the name of Michaela Wey, and that Michaela Wey had once been listed in an SEC filing as an executive officer of NYGG. Id. ¶¶ 6, 9, 12.

         Based on that information, the Garwood Affidavit urged that there was probable cause to believe that fruits, instrumentalities, and evidence of securities, mail, and wire fraud would be found within the Wey Apartment and sought permission to seize from the Apartment substantially the same categories of materials, pertaining to substantially the same individuals and entities, listed in the Komar Affidavit. Garwood Aff. ¶ 4, 13-16, 20, Exs. A-B. It also sought approval of substantially the same protocol as that proposed in the Komar Affidavit for searching computers and related equipment offsite, citing similar practicality concerns. Id. 17-20, Ex. C.

         C. The Search Warrants

         1.The NYGG Warrant

         United States Magistrate Judge Michael H. Dolinger approved the Government's application with respect to the NYGG offices and issued a corresponding search warrant on January 24, 2012. See May 27, 2016 Declaration of David Siegal ("Siegal Dec") Ex. 8, Dkt. No. 46-9 (the "NYGG Warrant"). The NYGG Warrant identified the premises to be searched as "[t]he office of [NYGG] at 40 Wall Street, 38th Floor, Suite 3800, New York, New York, and any closed or locked cabinets, briefcases, and other containers kept therein, including computers and electronic storage devices, excluding the individual office of James Baxter, Esq." Id. Ex. A.

         The property to be seized pursuant to the NYGG Warrant was defined through the interplay between two attached exhibits (both of which had originally been included in the Government's application in substantially identical form). Specifically, Exhibit A to the NYGG Warrant set forth, by category, the types of materials subject to seizure along with illustrative lists, and imposed the additional requirement that the actual materials to be seized relate in some way to at least one of a list of individuals and entities included in Exhibit B. The scope of Exhibit A is best illustrated by reproducing it in full, with top-line categories emphasized relative to their non-exhaustive supporting lists, as applicable:

1. Financial records concerning the individuals and entities listed in Exhibit B . . . including banking and brokerage firm account statements, checks, and transactions records, wire transfer instructions and similar documents concerning or reflecting movements of funds, account and account holder information, check numbers, account numbers and Federal Reserve routing numbers;
2. Personal financial records of any individuals named in Exhibit B or of any employees, agents, or shareholders of any of the entities listed in Exhibit B, including banking and brokerage firm account statements, checks, and transaction records, wire transfer instructions and similar documents concerning or reflecting movements of funds, account and account holder information, check numbers, account numbers and Federal Reserve routing numbers;
3. Telephone bills, telephone message pads, notes, memoranda and other records of internal and external communications between, among, or relating to any of the individuals and entities listed in Exhibit B;
4. Correspondence, audio tapes, and video tapes concerning any of the individuals and entities listed in Exhibit B;
5. Hotel, airline and credit card receipts reflecting the dates and locations of meetings or travel to meetings concerning any of the individuals and entities listed in Exhibit B;
6. Photographs, address books, Rolodexes, diaries, income tax returns and calendars concerning the operations and management of any of the individuals and entities listed in Exhibit B;
7. Computers, flash drives, internal and external hard drives, diskettes and other magnetic storage media, and files, data and information contained thereon, used to store names, telephone numbers and addresses, and other information, including but not limited to personal digital assistants such as iPhones, iPads, Blackberrys, smartphones, and cellphones, as well as drafts and final versions of documents and correspondence, used by, or used in connection with the individuals and entities listed in Exhibit B. . . .;
8. Marketing materials relating to any of the individuals and entities listed in Exhibit B, including offering materials, private placement memoranda, sales scripts, investor "lead" lists, investment agreements, financial statements, and other documents concerning, [or] relating to, the purchase or sale of securities;
9. Documents identifying shareholders or investors in the entities listed in Exhibit B, including transfer agent records, stock certificates, investor lists, investor files, investment subscription agreements, copies of checks received from or sent to investors, copies of account statements sent to investors, copies of correspondence sent to or received from investors, Federal Express, DHL or other records reflecting mailings by private commercial carriers and the U.S. Postal Service, and other documents concerning or reflecting the identities and participation of investors in such schemes;
10. Documents reflecting the ownership by the individuals and entities listed in Exhibit B of real properties and personal property purchased with the proceeds of fraud, including but not limited to houses, apartments, cars, boats, and jewelry, including purchase and sale agreements, deeds, mortgage documents, and other real estate or other property closing documents;
11. Identification documents and other documents which may reflect the identities of persons listed in Exhibit B or persons affiliated with the entities listed in Exhibit B; and
12. Corporate documents reflecting the ownership or structure of, or relationship between and among, any of the entities listed in Exhibit B, including incorporation documents, inter-company agreements, lists of partners and stockholders, organizational charts, and corporate resolutions and bylaws.

         NYGG Warrant Ex. A.

         Exhibit B to the NYGG Warrant, in turn, named the same approximately 220 individuals and entities identified in Exhibit B to the Komar Affidavit. Of great significance, the list included among its first two entries NYGG itself (whose offices, of course, would be the subject of the search) and Wey himself. See NYGG Warrant Ex. B. Reading Exhibits A and B together, then, the NYGG Warrant authorized the seizure from NYGG's offices of, for example, all "financial records, " "internal and external communications, " "correspondence, " and other things concerning NYGG.

         Beyond the requirement that the materials subject to seizure relate to at least one of the Exhibit B individuals/entities, the NYGG Warrant imposed no substantive limitations. It did not specify the crimes under investigation, whether by statutory citation or otherwise, or discuss any particular conduct of interest. It did not set out any date ranges or other timeframe-based criteria. Importantly, the NYGG Warrant also did not attach, incorporate, or otherwise expressly reference the Komar Affidavit.

         With respect to any "computers, computer-related equipment, and other electronic devices" found on the premises, the NYGG Warrant provided that the FBI would employ substantially the same search and seizure methodology proposed in the Komar Affidavit, which it described in another attached Exhibit (essentially, a copy of Exhibit C to the Komar Affidavit). See NYGG Warrant Exs. A, C. That methodology contemplated, in sum and substance, that FBI personnel trained in searching and seizing computer data would conduct an initial onsite review of any such items. Id. Ex. C. If a determination were made that a given item could not be searched onsite "within a reasonable amount of time and without jeopardizing the ability to preserve data, " then the FBI could either (i) copy its data for offsite review (if the device were found not to contain contraband) or (ii) seize the device for transportation to a law enforcement laboratory for offsite review (if the device were found to contain contraband or onsite data review or copying would be impractical). Id. In searching these items or their copies, the FBI would be permitted "to examine all of the data contained" but only "to view their precise contents and determine whether the data falls within the items to be seized as set forth" elsewhere in NYGG Warrant. Id. In other words, the procedures for searching computer equipment and electronic devices did not purport to expand or restrict the scope of the materials subject to seizure; rather, data from these items could ultimately be seized only if it fell within the "strictures" - such as they were - of Warrant Exhibits A and B. During these searches, the FBI would be required to "have procedures in place to segregate any potentially privileged materials or files." Id. If it were determined that any confiscated devices were "no longer necessary to retrieve and preserve the data" and that the "items [were] not subject to seizure pursuant to Federal Rule of Criminal Procedure 41(b), " the Government would be required to "return these items, upon request, within a reasonable period of time." Id.

         2. The Wey Apartment Warrant

         Magistrate Judge Dolinger also approved the Government's application to search the Wey Apartment, issuing a warrant on January 25, 2012 (during the course of the Government's search of the NYGG offices, as discussed further below). See Siegal Dec. Ex. 24, Dkt. No. 46-25 (the "Apartment Warrant"). Other than its description of the premises to be searched, the Apartment Warrant was substantially identical in all material respects to the NYGG Warrant, right down to its incorporation of copies of the same three Exhibits. Id. & Exs. A-C. Of particular note in the context of the forthcoming search of the Wey Apartment, Exhibit B (the list of relevant individuals and entities) included not only Wey himself but also Michaela Wey. Thus, the Apartment Warrant authorized the seizure from the Wey Apartment of, for example, all "financial records, " "internal and external communications, " "correspondence, " "photographs, " "audio tapes, " and "video tapes" concerning either of the Apartment's two adult occupants.

         D. The Searches

         After Wey filed the instant suppression motion, the Court made a preliminary determination that a hearing was warranted to address whether the Government acted in good faith in executing the NYGG Warrant and the Apartment Warrant and whether the Government acted reasonably and in good faith in executing off-site searches of computers and computer-related equipment recovered during the execution of the Warrants. Dkt. No. 69. Accordingly, the Court conducted a two-day suppression hearing on January 23 and January 24, 2017 (the "Hearing"), at which it heard live testimony from former Assistant United States Attorney David Massey, Special Agent Komar, Special Agent Thomas McGuire, Special Agent Elizabeth Miller, forensic examiner and information technology specialist Brian Booth.[2]

         What follows for the remainder of this Opinion constitutes the Court's findings of fact and conclusions of law. They are based upon the evidence taken at the hearing - with the benefit of supplemental post-hearing briefing and oral argument - as well additional evidentiary submissions by the parties in support of their original and supplemental briefs.

         1. Preparation for the NYGG Search

         The Government's investigation into Wey and NYGG was already at least several months old when the Government applied for the NYGG Warrant on January 24, 2012. Hearing Tr. 30:11-14. The investigation was led, during that period of time, by Agent Komar and then-AUSA David Massey. Hearing Tr. 14:16-20, 29:9-12, 120:11-15. AUSA Massey testified that the decision to apply for the NYGG Warrant was made "at least" several weeks - and "perhaps" even months - before the Government submitted its application. Id. at 30:23-31:4.

         In preparation for the Government's search of the NYGG offices, Agent Komar prepared an "operations order form" for circulation to the FBI search team (the "Operations Order"), which was comprised of approximately twenty agents predominantly from the C-43 securities fraud squad and/or the Computer Analysis Response Team ("CART"), along with personnel from the FBI's photography unit. Hearing Tr. 119:21-120:2, 122:10-123:16, 185:18-186:5, 236:22-237:4; Gov't Exs. 1 (Operations Order), 5 (FBI Crime Scene Sign-In Log for Search of NYGG). The Operations Order contained a "synopsis of the case, " authored by Komar, which asserted that there was probable cause to believe that Wey, acting through NYGG, had "committed securities fraud and manipulated the market for the securities of various small-capitalization issuers." Hearing Tr. 122:25-123:4; Gov't Ex. 1 at 1. The Operations Order then proceeded to outline in a brief paragraph the basic contours of the suspected scheme, substantially consistent with the Komar Affidavit:

Wey introduces Chinese companies to the U.S. markets and arranges reverse mergers and assists these companies [in] get[ting] listed on markets such as Nasdaq. It appears he has artificially inflated the number of round-lot shareholders for the purpose of meeting listing requirements. Wey then retains undisclosed beneficial ownership and/or control of large blocks of shares of the Chinese companies that are held in the name of nominees. Wey creates an artificial demand for the securities by working directly with a hand-picked team of retail stock brokers ... to aggressively solicit purchases of the Chinese companies' securities. Once the artificial demand is created and the stock price goes up, Wey sells the large block of nominee held shares.

Id. In a separate section, the Operations Order described the forthcoming operation as a search "for documents related to Wey assisting Chinese reverse mergers [to] falsify their records to meet listing standards for Nasdaq" and "control[ing] the trading volume in these Chinese companies, through a number of associated broker dealers." Id. at 5. The Operations Order did not reference or name any of the specific Issuers implicated in Wey's alleged scheme. Nor did it discuss any of the entities or individuals listed on Exhibit B to the NYGG Warrant (apart from NYGG and Wey) or explain their purported connections to the suspected criminal activities.

         Late in the afternoon of January 24, 2012 - the same day that the NYGG Warrant issued and the day before it was to be executed - Agent Komar and AUSA Massey conducted a pre-operation briefing attended by all members of the FBI search team. Hearing Tr. 15:6-16:3, 122:1-4, 123:19-124:-2. The briefing lasted approximately 45 minutes to an hour. Id. 240:24-25. During the briefing, AUSA Massey explained the nature of the scheme under investigation, using the Komar Affidavit as a reference, and described the "types of documents" that the team would be "looking for." Id. 68:25-71:17, 124:11-15; 239:7-21. Agent Komar summarized "some parts" of the investigation to date but primarily briefed the team on operational logistics for the coming search. Id. 124:19-23. Special Agent Thomas Maguire - who attended the briefing, participated in the search of the NYGG offices, and later took over for Agent Komar as the case agent on the Wey investigation - characterized the briefing as providing a "big-picture overview" of what was presented as a "fairly typical securities fraud case." Id. at 239:17-21.

         At the Hearing, Agent Komar could not recall any instructions or guidance provided to the search team as to any sorts of items that should not be seized during the forthcoming search. Id. 190:13-16. The team was instructed, however, that the office of NYGG's in-house legal counsel was off-limits and could not be searched during the operation. Id. 239:22-240:2.

         Also during the pre-search briefing, Agent Komar shared copies of the Operations Order with each member of the search team, and communicated to the team that the NYGG Warrant and the Komar Affidavit were "available" if anyone would like to review them personally. Id. 123:15-16, 125:2-126:6, 240:6-22. There is no credible evidence, however, that any agent other than Komar himself did in fact review the Komar Affidavit in advance of the search. Agent Komar testified that he "did not hand out copies" of the Komar Affidavit to the team, and "did not make sure every single person read" it. Id. 125:13-126:4. In addition, while Komar first testified at the Hearing to his vague belief that he at some point e-mailed the Komar Affidavit to members of the FBI team, subsequent searches by the Government identified no such e-mail communications. Id. 125:13-22, 228:14-230:4. AUSA Massey, for his part, expressed "doubt" that he read any portion of the Komar Affidavit directly to the search team. Id. 68:25-71:17. Agent Komar testified generally that at least one (unidentified) member of the search team did in fact review some portion of the Komar Affidavit; AUSA Massey, on the other hand, had no such recollections. Id. 68:25-71:17, 126:5-7, 185:12-20. The Government called no witnesses-other than Komar himself- who could definitively testify that they personally reviewed the Komar Affidavit prior to the search operation, and the Court cannot find that any such review took place.

         Agent Komar conceded at the Hearing that the planned search of the NYGG offices could have been scheduled on any date up to 10 days after the briefing to afford all members of the search team an opportunity to review the Komar Affidavit, but that the FBI elected to go forward with the search the following morning. Id. 186:6-25.

         2. Search of NYGG Offices

         On the morning of January 25, 2012, the search team assembled for a final pre-operation briefing at the FBI's Manhattan offices to discuss logistics for the search. Hearing Tr. 126:10-16. AUSA Massey did not attend that meeting. Id. 126:17-18.

         The search of the NYGG offices (the "NYGG Search") began shortly before 9:30 AM. Id. 126:19-127:1; Gov't Ex. 5. NYGG's suite consisted of an outer reception area surrounded on two sides by approximately nine individual offices, conference rooms, and a kitchen, together forming an "L" shape. Gov't Ex. 4 (NYGG Office Layout Diagram); Hearing Tr. 243:13-16. Wey and all other NYGG employees present in the office when the NYGG Search began were gathered into one of the conference rooms by FBI personnel and interviewed briefly to obtain basic contact information and background on their roles at NYGG. Hearing Tr. 127:4-9, 131:21-132:8, 243:18-23. Members of the FBI search team had copies of the NYGG Warrant, including its attachments, with them onsite, id. 127:23-25, 244:13-18, but there is no evidence that anyone other than Komar himself had a copy of the Komar Affidavit. Neither Wey nor any other employee on the scene was provided with a copy of the Komar Affidavit. Id. 46:8-17.

         Agent Komar, serving as the team leader, personally searched the reception area in the outer portion of the office and then remained in that area, ostensibly to field any questions from other agents. Although Komar himself testified generally that team members asked him questions on several occasions, he recalled only one specific inquiry as to whether a particular document fell within the scope of the NYGG Warrant. Id. 128:1-19, 130:7-131:6, 132:9-10. The Government presented no other evidence at the Hearing suggesting that the searching agents addressed questions to Agent Komar. The Court is likewise aware of no evidence that Agent Komar in any way directly supervised, reviewed, or spot-checked the team's seizure decisions.

         AUSA Massey was not onsite during the NYGG Search but communicated during the course of the Search with, at least, Agent Komar. Id. 16:4-8. At the Hearing, AUSA Massey could not recall having any discussions with Agent Komar or his team as to whether particular items fell within the scope of the NYGG Warrant, and agreed that it was generally up to the searching agents' "discretion" to make any such determinations. Hearing Tr. 67:18-68:20. From his own perspective, AUSA Massey testified, "all records of [NYGG] ... were in play, " id. 14:8-10, largely because the Government "needed to understand the entire business, even if some part of the business was legitimate, " in order to properly assess its role as a source of income to Wey, see, e.g., Id. 36:1-12 (citing Government's suspicion that Wey was "making way too much money to be accounted for by [NYGG's advisory fees])." When pressed to cite any types of materials not, in his view, covered by the NYGG Warrant, AUSA Massey offered only medical prescriptions, illegal drugs and paraphernalia, child pornography, and terrorist manifestos. Id. at 47:17-48:10. (Although Massey also later testified that he would deem "a bag of heroin ... found on the premises" that "said New York Global Group" on it "within the scope of the warrant." Id. 50:13-16.)

         Approximately twelve or thirteen of Komar's colleagues conducted the physical searches of NYGG's individual offices and other rooms. See, e.g., Id. 127:10-22, 243:24-244:9; Gov't Ex. 1; Gov't Ex 5. Of these agents, only Agent McGuire testified at the Hearing. Agent McGuire recalled personally searching one of NYGG's "larger" individual offices and deciding whether to seize documents by comparing their contents to the list of individuals and entities set forth in Exhibit B to the NYGG Warrant (which, of course, included NYGG itself). He testified that, while it was possible that he sought a second opinion from another agent on the search team at some point, he did not recall "coming across documents where [he] had a difficult time determining whether it was covered by the search warrant." Id. 243:17-247:23. Asked whether he remembered deciding not to seize any particular materials, Agent McGuire testified that he recalled determining that a set of resumes belonging to people who were apparently applying for jobs at NYGG were "not pertinent to the investigation." Id. 245:18-248:19. He also testified that he made that determination without consulting any of his colleagues, agreeing that it was a "clear decision" that such documents were "not responsive." Id. 298:13-299:1. Notwithstanding Agent McGuire's conclusion, resumes of NYGG applicants (whose names did not appear in the NYGG Warrant or Komar Affidavit) were in fact seized during the course of the NYGG Search. See, e.g., Supplemental Memorandum of Law in Support of Defendant Benjamin Wey's Motion to Suppress, Dkt. No. 95 ("Def. Supp. Br.") Ex. B.

         According to Agent Komar, the total volume of paper records found in the NYGG offices was - consistent with the Government's expectations going in - less than substantial. Id. 133:14-134:13. He testified that the team had sufficient time during the NYGG Search to review essentially every page of every document found, and estimated that, in total, the team ultimately seized approximately 4, 500 pages of hard-copy documents. Id.; see also Gov't Ex. 6 (Evidence Recovery Log from NYGG Search noting seizure of approximately thirteen redwelds, boxes, envelopes, and discs). Komar personally recovered only one redweld of documents; the balance was seized by other members of the search team. Gov't Ex. 6. Asked at the Hearing to compare the hard-copy search fruits to the overall volume of paper records found or reviewed, Agent Komar could not provide specifics but testified: "We didn't take every single piece of paper, but there really wasn't much paper to start with either." Hearing Tr. 134:5-13.

         Computer equipment and electronic devices found during the NYGG Search were assessed by CART personnel to determine whether onsite searches or data copying would be feasible. Id. 134:14-135:13. The team ultimately deemed these options impractical with respect to the vast majority of the items. Id.; see also Gov't Ex. 7 (CART On-Site Search Form for NYGG Search). With the exception of Wey's cell phone, which the search team seized, CART personnel copied or digitally imaged the cell phones of all NYGG employees present in the office during the NYGG Search. The balance of the electronic materials found, however, including all laptop computers, flash drives, and hard drives from desktop computers, were seized for offsite review. Hearing Tr. 134:14-135:13, 175:22-177:6; Gov't Ex. 7. In total, the team copied or seized approximately 24 pieces of computer or other electronic equipment. Gov't Ex. 7. With respect to NYGG employees' cell phones, at least, the search team did not make any onsite determination as to whether the devices related in any way to the individuals and entities set forth in Exhibit B to the NYGG Warrant; rather, the cell phones of all those present in the office were indiscriminately imaged (or seized) for later review. Hearing Tr. 176:2-6.

         The NYGG Search lasted approximately four to five hours, concluding shortly before 3:00 PM. Hearing Tr. at 181:7-9; Gov't Ex. 5.

         3. Search of Wey Apartment

         At the time it applied for the NYGG Warrant, the Government had reason to believe, at least, that stock certificates potentially implicated in Wey's purported scheme had at some point been sent to the Wey Apartment. Hearing Tr. 181:24-l 82:11 (Agent Komar acknowledging that the Komar Affidavit asserted as much). It did not, however, seek a search warrant for that location until the NYGG Search was in progress. Id. As alluded to above, at some point during the "early stages" of the NYGG Search, Agent Garwood of the FBI learned from interviews of NYGG employees that Michaela Wey served as NYGG's bookkeeper and office manager and generally completed her work from the Wey Apartment. Hearing Tr. 16:15-25, 135:14-24, 182:8-11. Upon receiving that additional information and with the NYGG Search having turned up none of the stock certificates of interest, AUSA Massey, along with Agent Garwood, drafted the Garwood Affidavit and applied for the Apartment Warrant. Hearing Tr. 17:1-18, 135:25-136:5, 181:10-183:23.

         With the application process in motion, Agent Komar instructed FBI personnel, including several agents already onsite at the Wey Apartment, to serve grand jury subpoenas on Michaela Wey, to secure the exterior of the Wey Apartment in order to ensure that no evidence would be removed or discarded. Hearing Tr. 136:6-13, 138:15-20, 253:9-254:7; Def. Ex. 16 (February 22, 2012 Memorandum of Agent Komar). The Court is aware of no evidence, however, that Komar or anyone else had any basis to believe that such activities were likely to take place.

         After the Apartment Warrant issued, FBI personnel entered the Wey Apartment at approximately 4:30 PM and commenced a search (the "Apartment Search"). Hearing Tr. 138:8-24, 254:8-18; Gov't Ex. 12 (FBI Crime Scene Sign-In Log for Apartment Search); Def. Ex. 16. Ultimately, approximately seventeen FBI agents participated in the Apartment Search in some capacity. Gov't Ex. 12. Most, but not all, of these individuals had also participated in the NYGG Search. Compare Gov't Ex. 5 with Gov't Ex. 12. No pre-operation briefing was conducted in advance of the Apartment Search. Hearing Tr. 300:18-20. There is also no evidence that any operations order or similar document was prepared to help guide the team in executing that Search.

         Agent McGuire, who conducted an initial walkthrough at the outset of the Apartment Search, testified that he "briefly" reviewed the Apartment Warrant before beginning the Apartment Search. Id. 254:12-25, 257:2-9. He did not, however, review the Garwood Affidavit, and testified that he was not aware of any FBI personnel possessing a copy of the Garwood Affidavit during the course of the Apartment Search. Id. 301:3-10. Agent McGuire testified repeatedly that, to his understanding at least, the team was authorized to seize from the Wey Apartment, among other things, "any record we would find related to [Wey] finances, " regardless "of date or time frame." Hearing Tr. 276:12-20, 304:11-14, 306:18-19.

         Once again, Agent Komar, who arrived on the scene at approximately 4:50 PM, functioned as the team leader during the Apartment Search. Hearing Tr. 138:25-139:l;Gov't Ex. 12. And once again, Agent Komar testified generally at the Hearing that he was asked unspecified questions by unnamed agents about whether unidentified documents were "relevant to the search warrant." Hearing Tr. 139:2-139:10. As in the context of the NYGG Search, however, the Government called no members of the search team who could testify to having consulted Komar with respect to seizure decisions.

         Within the Wey Apartment, the search team identified one "office area" with a "large amount of documents, " but otherwise did not locate any rooms with a "substantial" number of hard-copy documents. Hearing Tr. 139:5-140:3. Agent Komar personally assisted in searching "what appeared to be a guest room" and the rooms of Wey's children and then "focused [the team's] attention on the office area." Id. 139:14-25. AUSA Massey, once again, was not onsite for the Apartment Search, but did ...


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