U.S. v. Srivastava (U.S.D.C.)(Approved for Publication)

Signed March 6, 2007--Memorandum Opinion and Order by Judge Roger W. Titus. (Approved for publication.)

Defendant is a cardiologist practicing medicine through a Subchapter S Corporation who became the subject of a health care fraud investigation. In the course of the investigation, SA Marrero of HHS-OIG submitted a single affidavit in support of applications for three search warrants, which were ultimately approved. Two of the warrants applied to Defendant's medical offices, and the third authorized a search of Defendant's residence. Each warrant contained identical substantive language that authorized the seizure of a list of enumerated "records including, but not limited to, financial business, patient and other records related to" the Defendant's "business . . . which may constitute evidence . . .." SA Marrero then forwarded copies of seized documents between Defendant and the Bank of India to the U.S. Attorney's office, which documents were then forwarded to IRS and ultimately led to a formal investigation regarding possible tax fraud committed by the Defendant. Defendant then filed a Motion to Suppress based on its conclusion that the evidence in question had been obtained in violation of the Fourth Amendment, which motion was granted August 4, 2006.

The Government raised six main arguments in its Motion for Reconsideration: (1) The Court incorrectly interpreted the warrant; (2) the documents were not seized unlawfully; (3) more documents are related to Srivastava's business than the Court concluded because Srivasatava operates a Subchapter S corporation; (4) the evidence obtained in the IRS investigation was lawful; (5) the evidence should not have been suppressed under the independent source and the inevitable discovery doctrines; and (6) specifically, the Bank of India faxes should not have been suppressed.

The Court addressed all these arguments in the August 2006 opinion but repackaged some of its analysis with respect to the first and third arguments.

First, the Government suggested that the modifying clauses "related to the business" and "may constitute evidence of violations" should not be viewed as limits on the types of documents that could be seized. The Court, however, found these clauses must be read to limit the scope of the warrant in order to save it from what would otherwise be unconstitutional overbreadth. The Court determined that suppression was appropriate because of two additional and important factors. First, the quantity of the materials seized was significant. Many of the documents seized were not related to the investigation as the Government later returned many of them to the Defendant, although not until tax investigators had had an opportunity to review the contents. Further, SA Marrero specifically testified that he did not advise his agents on any limits regarding what they could collect and resulted in the seizure of many documents not authorized by the warrant, such as an invitation to a cultural event and a CVS "Extra Care" card. Thus, the Court's suppression order was rooted in the actions of the seizing agents who grossly exceeded the scope of the warrants and not simply the interpretation of the text of the warrants and accompanying affidavit.

Second, the Government argues that the type of corporation, Subchapter S, operated by Defendant is significant with respect to the volumes of documents collected by the agents, including the Bank of India documents, since he declared his income from the corporation on his individual tax return. The Court reasoned that, regardless of the type of business operated by Defendant, the agents should not have seized personal financial records and tax returns, and they should not have seized business records unless they tended to show violations of 18 USC §1347. These were the two simple and basic restrictions contained in the warrant but disregarded by Marrero. It was clear from Marrero's testimony that it was not as if the agents became confused during the search as to whether the documents were business or personal -- they went on a wholesale fishing expedition and seized all documents and many other personal affects without regard as to whether the documents or items were business records or demonstrative of health care fraud. Further, the Government argued that "some of the documents demonstrating defendant's income from a lucrative occupation and the disposition of that income may constitute health evidence of fraud (sic)." While it is true that evidence of extreme wealth or extravagant spending is admissible under the Federal Rules of Evidence, such evidence cannot be said to be evidence of health care fraud in this case. Unlike a typical drug dealer who has no legitimate source of income that would support an affluent lifestyle, Defendant was engaged in a legitimate and lucrative profession. As such, the Court rejected the so-called "proceeds of the crime" argument. The rationale that the financial records and tax returns seized were related to the Section 1347 investigation is also negated by the fact that the Government returned approximately 80% of the seized documents to the Defendant.

The full opinion is available in PDF.

Burman v. U.S. (Maryland U.S.D.C.)(Approved for Publication)

Issued February 7, 2007—Memorandum and Order by Chief Judge Benson Everett Legg. Approved for publication.

Burman was convicted in a jury trial of conspiring to distribute cocaine and possession with intent to distribute cocaine. Burman then filed a motion seeking the return of property the government seized pursuant to a search warrant leading to his indictment and subsequent conviction.

Property purchased with the proceeds of drug trafficking is subject to forfeiture pursuant to 21 U.S.C. §881 and, by statute, the government must initiate a forfeiture case by giving notice to any interested party in addition to publishing notice in a publication of general circulation. The interested party has a specified time in which to file a claim and may either file a request for judicial forfeiture proceedings with the seizing agency or elect to remain in the administrative forum by filing a petition for remission or mitigation. If the interested person seeks the prior option, the agency must refer the request to the applicable United States Attorney, who then files a complaint for forfeiture in federal district court, per 18 U.S.C. §983(a)(3). If a person to whom notice was sent does nothing and the administrative tribunal declares the property forfeited, the district court, by statute, lacks subsequent jurisdiction over the property with one exception: if the claimant alleges the government failed to provide him with adequate notice and that he did not otherwise know of the forfeiture proceedings. If the court concludes that the claimant was adequately advised of the forfeiture proceedings, the court must dismiss the claim. However, if the court concludes that notice was lacking, the government must return the property and/or file a new forfeiture action.

Under 18 U.S.C. §983(e), an "interested party" may move to set aside a declaration of forfeiture if (i) the government failed to take reasonable steps to provide him with notice, and (ii) the moving party did not otherwise know or have reason to know of the forfeiture in time to file a timely claim. The Court places the burden on the government to show that it took "reasonable steps" to provide notice to the claimant. "Reasonable notice" requires that the government must (i) send a certified letter, return receipt requested, to the facility where the prisoner is housed, (ii) show that a prison official signed for the letter, and (iii) provide evidence that mail delivery procedures existed at that facility that were reasonably calculated to ensure that the notice, once addressed to the inmate, would still reach him upon arrival at the prison (and, indeed, would only be accepted were the inmate actually present). Notice sent to the inmate's relatives, lawyer or former residence is insufficient.

The DEA sent multiple Notices of Forfeiture to Burman addressed to several jails, to his mother, and to attorneys who had represented him, but there is no evidence that these notices ever reached Burman. The government presented no evidence that Burman was at the particular jails when the notices were delivered, that the persons who signed for the notices were prison officials, or that mail delivery procedures at the jails were reasonably calculated to ensure that the notices reached Burman. Burman, however, evidently knew the government was seeking forfeiture of some of his property because he mailed the DEA letters asking what was happening with certain items. The DEA treated these letters as requests for judicial forfeiture proceedings, but denied the requests either because they were untimely or because Burman failed to submit his claims under oath as required by the statute. The DEA mailed Burman a number of corrective notices advising that his claim must be sworn under oath and giving him 20 days to cure the defect. Except with respect to one item of property, Burman never filed a claim that met the formal requirements. There is, further, no direct evidence that any of the corrective notices ever reached Burman. Consequently, the Court granted, in part, Burman's request for return of some of the property seized and reserved judgment on the remaining property ordering the government provide further evidence and briefing.

The full opinion is available in PDF.