U.S. v. Bridges

• Decision Date: 24 September 2003
• Docket Number: No. 01-30316.,01-30316.
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Alfred Gene Bridges, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1010

344 F.3d 1010

UNITED STATES of America, Plaintiff-Appellee, v. Alfred Gene Bridges, Defendant-Appellant.

No. 01-30316.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 11, 2003 — Seattle, Washington.

Filed September 24, 2003.

COPYRIGHT MATERIAL OMITTED

Robert Stephens, Jr., Billings, Montana, for the defendant-appellant.

James Seykora, Assistant United States Attorney, Billings, Montana, for the plaintiff-appellee.

Appeal from the United States District Court for the District of Monatana; Wm. Fremming Nielsen, District Judge, Presiding.^* D.C. No. CR-00-00053-WFN.

Before: Dorothy W. Nelson, Sidney R. Thomas, Circuit Judges, and Dean D. Pregerson, District Judge.^**

Opinion by Judge D.W. Nelson; Partial Concurrence and Partial Dissent by Judge Thomas.

OPINION

D.W. NELSON, Senior Circuit Judge:

Alfred Bridges appeals his conviction following a jury trial for conspiracy to defraud the United States, making false claims to the United States, and mail fraud. Bridges contends that the district court erred in denying his motion to suppress evidence that was seized by the Government with an invalid search warrant. Bridges also challenges the district court's conviction and judgment because the Government allegedly violated his rights under the Due Process clause by applying a "secret" policy to him in violation of the Taxpayer Bill of Rights. Lastly, Bridges claims that the district court's instructions to the jury were deficient. We have jurisdiction pursuant to 28 U.S.C. § 1291. We agree with Bridges that the search warrant was invalid and excessively broad in its scope. Bridges's Due Process claim is without merit, and we decline to reach the issue of the adequacy of the challenged jury instructions. Accordingly, Bridges's conviction is vacated and we remand to the district court for a new trial.

I. Factual and Procedural Background

Bridges operated a tax consulting business, Associated Tax Consultants ("ATC"), in Billings, Montana. Between 1997 and 2000, ATC generated $679,260.11 in revenue from its tax consulting business with more than 300 clients in thirty states. ATC advised its clients not to pay federal income taxes. According to ATC, residents of the United States are not liable for federal income taxes if they declare that they are "non-resident aliens."

Agents of the IRS's Criminal Investigation Division ("CID") launched an undercover investigation into ATC's operations in 1998. Undercover Treasury agents posing as prospective clients of ATC visited ATC's offices in 1999 and 2000. Bridges met with an undercover Treasury agent at ATC's offices for the first time in April 1999. Bridges advised the agent that he could avoid paying federal taxes if he declared to the IRS that he was a "non-resident alien." Bridges stated, "Once you become a client [of ATC], the point of the whole thing is not to pay [the IRS]."

From 1997 to 2000, ATC filed more than 100 claims with the IRS requesting tax refunds on behalf of its "non-resident alien" clients. On at least ten occasions, the IRS responded to ATC's claims with a form letter denying the claim and advising claimants that:

There are people who encourage others to deliberately violate our nation's tax laws. It would be unfortunate if you were to rely on their opinions. These persons take legal statements out of context and claim that they are not subject to tax laws. . . . Taxpayers who purchase this kind of information often wind up paying more in taxes, interest, and penalties than they would have paid simply by filing correct tax returns.

On no occasion did the IRS ever grant any of ATC's requests for a taxpayer refund.

The IRS obtained a search warrant from the district court to search ATC's offices in Billings. On January 13, 2000, Treasury agents executed the warrant and searched Bridges's offices located at 3021 6th Avenue North. The agents seized ATC's computer system, client files, tax codes, correspondence from ATC's clients, ATC's seminar videos, and other business documents and equipment found on the premises.

On March 10, 2000, Bridges requested that the IRS produce a copy of the Application and Affidavit for Search Warrant it filed in district court and return the items seized from his office. Bridges's request was denied by the district court. Bridges appealed. Before this Court could rule on his appeal, a federal grand jury in Montana indicted Bridges. This Court subsequently dismissed Bridges's appeal in a published opinion. See In re 3021 6th Ave. N., Billings, MT, 237 F.3d 1039 (9th Cir.2001) (finding that the district court's intervening indictment of Bridges caused this Court to lose jurisdiction over his appeal).

In August 2000, Bridges moved to suppress the items seized from ATC's offices, to have his property returned, and to dismiss the indictment. Bridges's motions were denied by the district court and the action proceeded to trial. In April 2001, a jury returned a verdict in favor of the Government, convicting Bridges of forty-one of the forty-four counts charged against him.

Bridges was sentenced to fifty-seven months imprisonment and three years supervised release.

II. Standard of Review

Motions to suppress are reviewed de novo. See United States v. Jones, 286 F.3d 1146, 1150 (9th Cir.2002). The issuance of a search warrant by a magistrate judge is reviewed for clear error. See United States v. Wright, 215 F.3d 1020, 1025 (9th Cir.2000). Motions to dismiss an indictment based on improper or outrageous Government conduct are reviewed de novo. United States v. Lazarevich, 147 F.3d 1061, 1065 (9th Cir.1998). The district court's ruling on a Rule 29 motion for acquittal is also reviewed de novo. See United States v. Ruiz-Lopez, 234 F.3d 445, 447 (9th Cir.2001).

III. Discussion

A. Fourth Amendment Claim

The Fourth Amendment states in pertinent part that, "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause." U.S. Const. amend. IV. "These words are precise and clear." Stanford v. Texas, 379 U.S. 476, 85 S.Ct. 506, 13 L.Ed.2d 431 (1965). "It is familiar history that indiscriminate searches and seizures conducted under the authority of `general warrants' were the immediate evils that motivated the framing and adoption of the Fourth Amendment." Payton v. New York, 445 U.S. 573, 583, 100 S.Ct. 1371, 63 L.Ed.2d 639 (1980) (footnote omitted).¹ "The Amendment is to be liberally construed and all owe the duty of vigilance for its effective enforcement lest there shall be impairment of the rights for the protection of which it was adopted." Go-Bart Importing Co. v. United States, 282 U.S. 344, 357, 51 S.Ct. 153, 75 L.Ed. 374 (1931).

1. The Government possessed probable cause to search ATC's offices.

In Illinois v. Gates, 462 U.S. 213, 238-39, 103 S.Ct. 2317, 76 L.Ed.2d 527 (1983), the Supreme Court

[R]eaffirm[ed] the totality-of-the-circumstances analysis that traditionally has informed probable-cause determinations. The task of the issuing magistrate is simply to make a practical, common-sense decision whether, given all the circumstances set forth in the affidavit before him . . . there is a fair probability that contraband or evidence of a crime will be found in a particular place. And the duty of a reviewing court is simply to ensure that the magistrate had a substantial basis for . . . conclu[ding] that probable cause existed.

Id. at 238, 103 S.Ct. 2317 (internal quotation marks and citations omitted). Probable cause "means less than evidence which would justify condemnation, and . . . may rest upon evidence which is not legally competent in a criminal trial." United States v. Ventresca, 380 U.S. 102, 107, 85 S.Ct. 741, 13 L.Ed.2d 684 (1965) (internal quotation marks and citations omitted).

In the case at bar, the Government's application for a search warrant was supported by the affidavit (the "Affidavit") of IRS Special Agent Loretta Rodriguez. The Affidavit, which is twenty-five pages long, sets forth in great detail the Government's bases for requesting a warrant and, specifically, outlines the Government's allegations against ATC and Bridges. In the Affidavit, Agent Rodriguez claims that Bridges and ATC manufactured false documents, evaded paying federal income taxes, filed fraudulent claims with the IRS, obstructed or impeded the Government's lawful administration of Title 26, conspired to defraud the United States, and engaged in multiple counts of mail fraud.

We find that Agent Rodriguez's Affidavit is more than sufficient to demonstrate probable cause. As noted by the Supreme Court, "an affidavit may be based on hearsay information and need not reflect the direct personal observations of the affiant, so long as the magistrate is informed of some of the underlying circumstances supporting the affiant's conclusions. . . ." Ventresca, 380 U.S. at 108, 85 S.Ct. 741 (internal quotation marks and citations omitted). Here, Agent Rodriguez's allegations were premised on evidence obtained by federal agents who met Bridges and several other ATC personnel, complaints received from former ATC clients, a videotape of Bridges actually explaining his illegal tax strategies, and correspondence to the IRS from ATC executing the fraudulent scheme.

Specifically, the Affidavit substantiates its claims with the statements of undercover Treasury agents who interacted with ATC and Bridges. For instance, (1) the IRS office in Missoula, Montana, received a letter from Bridges stating that his client Donn Dugan, a resident of Montana, was a non-resident alien of the United States; (2) an undercover Treasury agent attended a seminar at ATC's offices, where he was played a videotape of Bridges explaining how his illegal scheme worked; (3) an undercover agent posing as an interested client met with Bridges in Billings, paid him $2,100 in fees, and was...