Wednesday, April 04, 2018

Third Circuit Upholds Application of Sentencing Enhancements for Leadership Role and Conspiracy Relocation in Bank and Wire Fraud Conspiracy

In United States v. Thung Van Huynh, 884 F.3d 160 (3d Cir., March 6, 2018), Defendant pled guilty to participating in a bank and wire fraud conspiracy to purchase luxury wristwatches. Specifically, Defendant admitted to purchasing stolen identification and credit reporting information from prospective car buyers in order to create counterfeit driver’s licenses and credit cards. Defendant then gave the counterfeit driver’s licenses and credit cards to his co-conspirators so that they could obtain lines of credit at several financial institutions. The co-conspirators used the lines of credit to purchase the wristwatches. Defendant then sold the wristwatches to a fence in California for cash, which he used to pay his co-conspirators for their services and to cover other expenses of the fraudulent scheme.

In the plea agreement, the government reserved the right to seek an enhancement for Defendant’s leadership role under U.S.S.G. ' 3B1.1(a). However, the plea agreement did not discuss the application of the conspiracy relocation enhancement under U.S.S.G. '' 2B1.1(b)(10). Nonetheless, the plea agreement expressly stated that the government was not restricted in responding to the sentencing court’s questions regarding the application of any sentencing guideline.

The probation office concluded that these two enhancements applied, and the sentencing court agreed. Specifically, the sentencing court concluded that Defendant’s fraudulent scheme, involving several co-conspirators who facilitated or actually made purchases at dozens of jewelry stores across 16 states, was “extensive.”

Defendant challenged the application of both of these enhancements. In reference to the relocation enhancement, Defendant claimed that he did not move his fraudulent scheme from one jurisdiction to another in order to evade law enforcement officials, but merely operated the scheme in multiple locations. In reference to the leadership enhancement, Defendant claimed that he was an equal partner with another co-conspirator, and that he shared the proceeds of the scheme equally with the other co-conspirators. He also claimed that he did not exercise decision-making authority over the co-conspirators or the conspiracy’s profits.

The Third Circuit ultimately affirmed the sentence, concluding that the sentencing court did not clearly err when it applied both of the enhancements. The court ruled that the relocation enhancement was properly applied because Defendant targeted stores far from his home in California, primarily on the East Coast.  Defendant himself was stopped by law enforcement officials in Michigan and Texas while attempting to purchase wristwatches. Defendant also never targeted the same store twice, except for a single instance.

The Third Circuit also ruled that the leadership enhancement was properly applied, due to the “overwhelming evidence”  of Defendant’s “singular leadership role.” The evidence presented established that Defendant recruited the co-conspirators, obtained the supplies necessary for them to execute the scheme, identified the targeted stores, made the travel arrangements, and controlled the scheme’s finances.  

Defendant also claimed that the government had breached the plea agreement by failing to object to the sentencing court’s application of the relocation enhancement. The Third Circuit also ruled that the government did not breach the plea agreement because the language included in the agreement allowed the government fully answer any questions posed by the sentencing court regarding the application of the guidelines. Consequently, the plea agreement did not require the government to affirmatively object to the application of any sentencing guideline. In fact, when questioned by the court during the sentencing hearing, the government agreed with Defendant that the relocation enhancement did not apply.

Sunday, February 25, 2018

Good faith exception applied to evidence seized as the result of a warrant with extraterritorial application in violation of a then existing rule

United States of America v. Gabriel Werdene, No 10-3588 (3d Cir., 2/21/2018)

In an opinion dealing with a search warrant from the Eastern District of Virginia that eventually resulted in a change to a Federal Rule of Criminal Procedure, the Court ruled that the Defendant's right against unreasonable search and seizure was violated when under a pre-12/1/2016 version of Fed.R.CrimPro. 41(b), a magistrate approved a warrant authorizing searches of and seizure of data from computers located outside of the magistrate's district. It then ruled that despite the request for and authorization of a search and seizure not allowed any Federal Rule of Criminal Procedure, the evidence should be admitted anyway because the FBI agents who procured the warrant acted in good faith.

Investigating dark web distribution of child pornography, the FBI seized a server for an online forum called Playpen in North Carolina, arrested its Florida owner, and moved the server to a location in the Eastern District of Virginia. It obtained a warrant from a magistrate in that district to monitor communications on the server and then continued to operate the Playpen forum,  using NIT, ("government created malware") to gather IP addresses and other information from computers logging in. (See note 1, infra.)  Mr. Werdene was one of the Playpen users who logged in, commenting on the pornography, and sharing links using the username "thepervert." A separate search warrant for his home was obtained as a result of the investigation, where the FBI seized a USB drive and a DVD containing child pornography. He was charged with a single count of possessing child pornography. He sought suppression of the evidence seized from him because Fed.R.Crim.Pro. 51(b) did not authorize searches of computers outside of the issuing magistrate's district. He pled guilty and was sentenced, reserving the right to appeal the denial of his suppression motion.

Magistrates cannot authorize searches outside of their districts unless specifically authorized by law. 28 U.S.C. §636(a). Rule 41(b), which sets forth the territorial limits of warrants for various searches, did not, at the time of the issuance of the search warrant, authorize searches of computers outside of the issuing magistrate's district. (That was changed with an amendment to Rule 41 on December 1, 2016, following the numerous motions to dismiss filed all over the country as a result of the Playpen investigation.) The Court, like many, if not all courts that have considered this issue, concluded that the warrant should not have issued for any search outside of the Eastern District of Virginia. The Court considered, and rejected, arguments that the government has raised in other districts, such as the search was analogous to one using a tracking device (for which Rule 42(b) does authorize extra-territorial application) (see Note 2, infra), and that the violation of Rule 41(b) was not a violation of the 4th Amendment. ("[T]he Rule 41(b) violation was of constitutional magnitude because 'at the time of the framing . . . a warrant issued for a search or seizure beyond the territorial jurisdiction of a magistrate's powers under positive law was treated as no warrant at all.'") The warrant was void ab initio.

However, like many, though not all, other courts that have considered this issue, the Court concluded that the good faith exception prevented suppression of the evidence obtained from the computers ensnared in the investigation. It rejected Mr. Werdene's argument that the exception cannot apply to warrants that are void ab initio because such warrants do not have the force of law.  The Court ruled that the deterrence effect of the exclusionary rule is not advanced by a blanket rule excluding such warrants form the goof faith exception.

In this Circuit, there are four circumstances on which reliance on a faulty warrant is unreasonable:
  1.  the magistrate issued the warrant in reliance on a deliberately or recklessly false affidavit;
  2.  the magistrate abandoned his judicial role and failed to perform his neutral and detached function;
  3. the warrant was based on an affidavit so lacking in indicia of probable cause as to render official belief in its existence entirely unreasonable; or
  4. the warrant was so facially deficient that it failed to particularize the place to be searched or the things to be seized.
The Court found that none of these criteria applied to the E.D.Va. warrant. The Court also found that the FBI's reliance on the warrant was not unreasonable even though it violated an advisory in the U.S. Attorney's manual that suggested that '[a]gents should obtain multiple warrants if they have reason to believe that a network search will retrieve data stored in multiple locations." The advice in the manual was for attorneys, and not FBI agents, who are not expected to understand legal nuances the way that an attorney would.

Note 1. A district court, in a prosecution in another district arising from the same investigation and search warrant, considering a motion to dismiss due to outrageous government conduct, said of the entire investigation, "[T]he government's investigation had disturbing consequences: while investigating child pornography, the government facilitated the distribution of child pornography and did so in way that did not allow the pornography it distributed to be retrieved or cabined. Thus, the child pornography distributed by the government might live on and be redistributed in the internet ether for an indeterminate period. Furthermore, the Court is concerned by [the defendant's] allegations that traffic to Playpen increased after the government took over operation of the site." United States v. Allain. 1:15-cr-10251-ADB (D.Mass. 9/29/2016), 

Note 2. In his concurring opinion, Judge Nygaard wrote that he would not have considered the tracking device argument because in the district court the government conceded that none of Rule 41's exceptions to the bar on extraterritorial scope of a search warrant applied. The Government argued that it could raise the issue on appeal because as the prevailing party, it could advance any reason in support of affirmance. Judge Nygaard would have held the Government bound to concessions it made in the district court.

Image from PC Magazine, "Inside the Dark Web," 2/4/2015,,2817,2476003,00.asp