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United States v. Giraudo

United States District Court, N.D. California

July 18, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
JOSEPH J. GIRAUDO, RAYMOND A. GRINSELL, KEVIN B. CULLINANE, JAMES F. APPENRODT, and ABRAHAM S. FARAG, Defendants.

          ORDER DENYING MOTION TO SUPPRESS FURTHER EVIDENCE AS FRUIT OF THE POISONOUS TREE

          CHARLES R. BREYER UNITED STATES DISTRICT JUDGE

         In this criminal case, the sprawl of litigation about the alleged taint from unlawful stationary audio recordings has approached that of the investigation itself. But unlike the latter, the former has come up empty.

         I.

         In October 2009, two brothers reported extensive bid-rigging at public foreclosure auctions in San Francisco and San Mateo counties. The men-known as “CHS-AG” and “CHS-RG”-told authorities that they had been asked to make cash payoffs to keep bidding down. See Gov't Exs. 87, 162. They identified Mo Rezaian, Dan Rosenbledt, and Defendants Joseph Giraudo, Raymond Grinsell, and Kevin Cullinane as members of the alleged conspiracy.[1] Id.

         The FBI investigated. Agents reviewed documents obtained from the brothers and began conducting surveillance of the San Francisco and San Mateo auctions. See Jan. 17, 2017 Tr. at 20; Jan. 19, 2017 Tr. at 265-66, 350. CHS-RG and an undercover agent (“UCE”) continued participating in the allegedly collusive conduct-wearing hidden microphones. Jan. 19, 2017 Tr. at 265-66. Other agents photographed and videotaped the goings-on from discrete locations. Id. This new, lawfully obtained evidence “rapidly corroborated” the brothers' reports of rampant bid-rigging and pointed to a host of additional suspects. Feb. 11, 2016 Tr. at 183; Jan. 19, 2017 Tr. at 269-70.

         Two of these additional suspects were Gajan Thia and Juan Diaz. On December 6, 2009, CHS-RG overheard Thia agree not to bid against Cullinane in exchange for a $15, 000 payoff from Rezaian and Rosenbledt. Gov't Ex. 101; Def. Ex. 2-81. Though the conversation was not captured on his microphone, CHS-RG reported the agreement the next day. Id. He also told the government that Thia was working with Diaz, and that together they ran a company called Equity Chase Inc. Id.

         By late December 2009, the government feared that the brothers' relationship with Defendants had soured. Feb. 11, 2016 Tr. at 56, 72-73. In an attempt to capture out-of-earshot conversations, agents planted stationary recording devices on an unmarked police car, backpack, sprinkler, and (fittingly) a planter. Id. at 36, 115. Despite its concerns, and despite deploying these stationary devices, the government did not give up on its original investigative methods. Jan. 19, 2017 Tr. at 274. CHS-RG, for example, reported that Thia had made a pay off to Rezaian and that a man named Bob Williams appeared to have done the same for Defendant Abraham Farag. Gov't Exs. 76, 112. He also identified Defendant James Appenrodt as a participant in the apparent bid-rigging. Jan. 19, 2017 Tr. at 270-71. FBI agents, for their part, continued surveilling the auctions.

         Special Agent Roahn Wynar was doing just that on January 28, 2010, when he saw a conversation between Rezaian, Rosenbledt, and Thia erupt into an argument. Jan. 17, 2017 Tr. at 107. Fearing a fight to follow, Agent Wynar intervened and escorted Thia away from the confrontation. Id. at 109. He then identified himself as a law enforcement officer and asked Thia to meet later that day. Id. at 110-11. When they met again, Thia explained that Rezaian and Rosenbledt had accused him of trying to “piggy back” off of certain bids. Gov't Ex. 74 at 2. Thia also implicated Cullinane, Rosenbledt, Grinsell, and others in bid-rigging.[2]Id. at 1. Agent Wynar told him that the government was investigating collusive activity at the auctions and recommended that Thia retain an attorney. Jan. 17, 2017 Tr. at 89, 106. He also asked Thia not to tell anyone else about the investigation. Id. at 106.

         Thia took Agent Wynar's advice about getting a lawyer but broke his promise about keeping the investigation a secret. See Jan. 19, 2017 Tr. at 309-10; Feb. 27, 2017 Tr. at 528; Jan. 17, 2017 Tr. at 114. He tipped off Diaz about the investigation, spurring the latter to lawyer-up himself. Jan. 17, 2017 Tr. at 114; Def. Ex. 2-122. Diaz's attorney then contacted the government and offered to cooperate. Id. The government interviewed Thia and Diaz several times, and both men admitted to bid-rigging in San Mateo as well as in the East Bay. Gov't Exs. 196-200; Def. Exs. 2-112, 2-122. Their cooperation was formalized soon after. Feb. 27, 2017 Tr. at 391, 439. Neither was charged with a crime.

         In March 2010, the government used information supplied by Thia to apply for pen registers on phones belonging to Rezaian and Giraudo. Gov't Exs. 98-100. Those applications did not refer to stationary audio recordings, Jan. 19, 2017 Tr. at 32, though they contained information about a property discussed on them, Park Pacifica, see, e.g., Feb. 27, 2017 Tr. at 422.

         The investigation continued apace. CHS-RG, CHS-AG, and UCE recorded further incriminating conversations on their hidden microphones, while agents conducted more physical surveillance. See Opp'n at 8-9 (providing relevant citations to the record). In November and December of 2010, agents searched Rezaian's and Giraudo's trash, where they found spreadsheets chronicling purchases of various properties and, for some purchases, memorializing an accompanying bid-rigging agreement. See Gov't Exs. 120-22, 168, 193. The government used that information, along with further evidence supplied by cooperators and FBI agents, to apply for search warrants of Giraudo's and Rezaian's houses, Giraudo's car, and Grinsell's office, among other locations.[3] Gov't Exs. 83-87; Jan. 19, 2017 Tr. at 274-75; Feb. 28, 2017 Tr. at 615. Like the pen register applications, these contained information about Park Pacifica but did not refer to stationary audio recordings. See Jan 17, 2017 Tr. at 86-88; Jan. 19, 2017 Tr. at 277.

         Agents executed the searches in January 2011. They recovered a heap of incriminating evidence, including detailed records of hundreds of payoff agreements from Rezaian's computer, cell phone, and paper notes. Gov't Exs. 119, 147. With this new evidence in hand, the government convinced ten alleged conspirators to plead guilty over the next 18 months: Craig Lipton, Laith Salma, James Doherty, Patrick Campion, Henri Pessah, Keith Goodman, Troy Kent, Gary Anderson, Lydia Fong, and Matthew Worthing. Several of them implicated Rezaian, Rosenbledt, and Defendants in collusive activity. See, e.g., Def. Exs. 2-95, 2-103.

         On November 19, 2012, the government met with Rezaian's attorneys, who had “expressed an interest in seeing if [they] could work out a plea.” Feb. 28, 2017 Tr. at 643. The 45-minute presentation included an overview of the three parallel investigations happening in San Joaquin County, Contra Costa and Alameda County, and San Francisco and San Mateo Counties. Gov. Ex. 123. It made clear that several members of the alleged conspiracy were cooperating and detailed numerous inculpatory documents, including those obtained from Rezaian. Id. It also contained surveillance photographs and some 19-plus minutes of lawfully obtained video and audio recordings. Gov't Ex. 72. And, notably for present purposes, the presentation included a 25-second audio clip from a stationary audio recording of an incriminating conversation, albeit one for which both CHS-RG and UCE were present and mic'd up. Feb. 28, 2017 Tr. at 652-54. Two months later, the government met with Rosenbledt's attorneys and showed them a tweaked version of the same presentation.[4] See id.; Def Exs. 2-76, 2-77; Gov't Ex. 73.

         On January 23, 2013, Rezaian's business partner, Norman Montalvo, pleaded guilty. Feb. 28, 2017 Tr. at 648; United States v. Montalvo, case no. 12-cr-0785-CRB (dkts. 10, 11). He, like others before him, proceeded to implicate Rezaian and Rosenbledt, along with several Defendants in the alleged scheme. See Gov't Exs. 184, 230. On February 20, another alleged co-conspirator, Gilbert Chung, pleaded guilty. See United States v. Chung, no. 13-CR-0069-CRB (dkt. 6). On May 2-some six months after his attorneys sat down with the government-Rezaian pleaded guilty. Gov't Ex. 80.

         Three months later, Bob Williams pleaded guilty to bid-rigging charges of his own. See United States v. Williams, no. 13-CR-0388-CRB (dkt. 8). On November 4, Kuo Hsuan Chang did the same. See United States v. Chang, no. 13-CR-0670-CRB (dkt. 11). The next day-some eight months after his attorneys sat down with the government-Rosenbledt pleaded guilty.[5] Gov't Ex. 81.

         Defendants were indicted in October 2014 and, about a year later, moved to suppress the stationary audio recordings and any evidence tainted thereby under the Fourth Amendment and Title III of the Omnibus Crime Control and Safe Streets Act of 1968. See Mot. to Suppress (dkt. 58). After conducting an evidentiary hearing, the Court granted the motion to suppress all stationary audio recordings.[6] See Order on Mot. to Suppress (dkt. 149) at 18-19. It then conducted another evidentiary hearing to determine what evidence, if any, was tainted by the now-suppressed stationary audio recordings. The parties submitted (yes) 154 pages of further briefing. Based on that sprawling record, the Court makes the foregoing findings of fact and the following conclusions of law.

         II.

         Although Fourth Amendment and Title III protections have their differences, see, e.g., Clarifying Order (dkt. 191) at 7, the scope of their fruit-of-the-poisonous-tree doctrines is not one of them. See United States v. Smith, 155 F.3d 1051, 1059 (9th Cir. 1998) (citing United States v. Spagnuolo, 549 F.2d 705, 711 (9th Cir. 1977)). So to decide whether evidence is “derived” from an unlawfully intercepted communication under 18 U.S.C. § 2515, the ...


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