601 F.Supp. 1214 (E.D.N.Y. 1985), 80 CR 650, United States v. Gel Spice Co., Inc.

Docket Nº:80 CR 650.
Citation:601 F.Supp. 1214
Party Name:UNITED STATES of America, v. GEL SPICE CO., INC., Barry Engel and Andre S. Engel, Defendants.
Case Date:January 28, 1985
Court:United States District Courts, 2nd Circuit, Eastern District of New York
 
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601 F.Supp. 1214 (E.D.N.Y. 1985)

UNITED STATES of America,

v.

GEL SPICE CO., INC., Barry Engel and Andre S. Engel, Defendants.

No. 80 CR 650.

United States District Court, E.D. New York.

Jan. 28, 1985

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U.S. Dept. of Justice, Raymond W. Philipps, Beverly S. Nash, Washington, D.C., of counsel, for the U.S.

Friend, Dorfman & Marks, New York City (Jerold W. Dorfman, New York City, of counsel), for Gel Spice Co. and Barry Engel.

Perles & Albert, New York City (David A. Beale, New York City, of counsel) for Andre S. Engel.

MEMORANDUM AND ORDER

McLAUGHLIN, District Judge.

The defendant corporation, its president, Barry Engel, and its vice-president, Andre Engel, are charged in a ten-count Information alleging, in substance, that the defendants permitted food to become adulterated within the meaning of §§ 342(a)(3) and 342(a)(4) of the Food, Drug and Cosmetic Act (the "Act"), 21 U.S.C. § 301 et seq. Defendants made several motions to suppress evidence and to dismiss certain counts of the Information. United States Magistrate A. Simon Chrein of this Court denied those motions, and defendants have appealed. 28 U.S.C. § 636(b). This Memorandum and Order embodies ruling made orally on October 21, 1983.

Facts

Gel Spice, Inc. has been the subject of regular inspections by the Food and Drug Administration (FDA) since 1972. In July 1976, March-April 1977, and July 1977, FDA inspectors conducted three extensive inspections of the Gel Spice warehouse in Brooklyn, New York. On those occasions photographs were taken and certain lots of allegedly adulterated foods were seized.

Three hearings were subsequently held pursuant to § 305 of the Act, 21 U.S.C. § 335. Section 305 hearings afford a person against whom the FDA is contemplating a criminal prosecution "appropriate notice and an opportunity to present his views, either orally or in writing, with regard to such contemplated proceeding" before the matter is referred to the United States Attorney for prosecution. Id.

The first § 305 hearing was held on October 27, 1976 following the July 1976 inspection, and the second on December 20, 1977 following the March-April and July 1977 inspections. On September 18, 1978, the FDA Chief Counsel formally referred a request for prosecution of Gel Spice to the Office of the United States Attorney in the United States Department of Justice.

In January 1979, the FDA conducted another inspection, which disclosed an active rodent infestation on the Gel Spice premises. Another § 305 hearing was held on

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May 30, 1979; and this Information was filed in December 1980.

Discussion

1. FDA's Good Faith

Defendants' first motion is to dismiss the Information or to suppress evidence on the ground that the government obtained the evidence in bad faith; that is, that the government conducted the searches, not in furtherance of administrative purposes, but rather to obtain evidence for a criminal prosecution that was already planned. Defendants contend that they are entitled to an evidentiary hearing at least on the issue of the government's good faith.

A regulatory agency may investigate possible violations of law through its administrative process, provided that its inquiries are for a proper purpose, the information sought is relevant to that purpose, and the statutory procedures are observed. United States v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 254-255, 13 L.Ed.2d 112 (1964). Once the agency has established the existence of a valid civil purpose, the burden shifts to the defendants to come forward with evidence of bad faith. See United States v. O'Henry's Film Works, 598 F.2d 313, 320 (2d Cir.1979); United States v. Morgan Guaranty Trust Co., 572 F.2d 36, 42-43 n. 9 (2d Cir.), cert. denied, 439 U.S. 822, 99 S.Ct. 89, 58 L.Ed.2d 114 (1978). Magistrate Chrein held (Interim Report and Recommendation at 11-12), and I agree, that the burden is on the defendants in this case "to disprove the actual existence of a valid ... purpose ..." United States v. LaSalle National Bank, 437 U.S. 298, 316, 98 S.Ct. 2357, 2367, 57 L.Ed.2d 221 (1978).

Before obtaining evidentiary hearing on the issue of the government's good faith, defendants must make a substantial preliminary showing of bad faith. United States v. O'Henry's Film Works, supra, 598 F.2d at 320; United States v. Morgan Guaranty Trust Co., supra, 572 F.2d at 42-43 n. 9; United States v. Morgan Guaranty Trust Co., 524 F.Supp. 24, 27 (S.D.N.Y.1981). To establish bad faith, defendants must show that the sole purpose of the investigation was investigatory, rather than regulatory. United States v. LaSalle National Bank, supra, 437 U.S. at 316-17, 98 S.Ct. at 2367-68; Securities and Exchange Commission v. Dresser Industries, Inc., 628 F.2d 1368, 1387 (D.C.Cir.) (en banc), cert. denied, 449 U.S. 993, 101 S.Ct. 529, 66 L.Ed.2d 289 (1980); United States v. Schutterle, 586 F.2d 1201, 1203 (8th Cir.1978).

I agree with Magistrate Chrein that the FDA conducted its investigation pursuant to a valid administrative scheme and not for the purpose of gathering evidence (Final Report and Recommendation at 2-3). Magistrate Chrein further found that the government made its decision on September 18, 1978, to prosecute defendants for the violations discovered at the July 1976, March-April 1977, and July 1977 inspections. The decision to prosecute defendants for the January 1979 violations was made on November 21, 1979. Id. These findings, which I adopt, undermine defendants' contention that the FDA inspections were "for an investigatory rather than regulatory purpose." United States v. Shaefer, Michael and Clairton Slag, Inc., 637 F.2d 200, 204 (3d Cir.1980).

An evidentiary hearing is not required without a meaningful factual showing of an improper purpose by the agency. Securities and Exchange Commission v. Howatt, 525 F.2d 226, 229 (1st Cir.1975). I am satisfied that the defendants have made no such showing in this case. Accordingly, defendants' motion for dismissal, suppression or an evidentiary hearing regarding the good faith of the FDA is denied.

2. Discovery of FDA Records

Because I have found that defendants failed to make a substantial preliminary showing of bad faith, it follows that they are not entitled to discovery of internal FDA records related to the inspection of the Gel Spice premises beyond those already in their possession. I reject defendants' contention that they are entitled

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to discovery as a matter of law. In accordance with United States v. Berrios, 501 F.2d 1207 (2d Cir.1974), Magistrate Chrein made an in camera inspection of the materials sought by defendants. He determined that the documents sought were not relevant to the defenses raised; that is, they would not tend to establish the elements of any defense (Interim Report and Recommendation at 16-17). Under Berrios, therefore, they need not be produced. I have conducted a de novo examination of the documents and conclude that they are not demonstrably relevant to the defenses raised. Furthermore, the documents in question closely parallel records that have already been provided to the defendants in discovery proceedings. Their right of confrontation has been rejected.

I am satisfied that Magistrate Chrein's ex parte examination of the documents was proper. Fed.R.Crim.P. 16(d)(1) permits a party to make an ex parte showing when seeking a protective order; the adversary's rights are protected by the fact that the text of the party's statement must be preserved in the event of an appeal. Id. Counsel for the government was present solely to identify documents and answer questions. The ex parte examination was well within the bounds of the Code of Professional Responsibility and the Code of Judicial Conduct. No prejudice has inured to defendants.

3. Statements Made During FDA Inspections

Defendants also move to suppress all statements made by Barry Engel and Andre Engel during the four inspections of the Gel Spice premises. The motions are based on alleged violations of defendants' rights under the Fourth and Fifth Amendments.

Defendants made the statements in question during inspections conducted pursuant to lawful authority and consistent with the requirements of the Act, 21 U.S.C. § 374. FDA personnel presented written notice of each inspection and produced the proper credentials. I agree with Magistrate Chrein that defendants consented to each of the inspections (Final Report and Recommendation at 11). Defendants have submitted no evidence to support their contention that statements were obtained from them involuntarily, either through coercion or duplicity. Because the defendants were not in custody, Miranda warnings were not required. See United States v. Jamieson-McKames Pharmaceuticals, Inc., 651 F.2d 532, 543 (8th Cir.1981), cert. denied, 455 U.S. 1016, 102 S.Ct. 1709, 72 L.Ed.2d 133 (1982); United States v. Dudgeon, 279 F.Supp. 300, 302 (D.Mass.1967). The statements were made voluntarily during lawful inspections; I therefore deny the motion to suppress.

4. Statements Made at Section 305 Hearings

Defendants have also moved to suppress statements made at the § 305 hearings. These hearings were held following the FDA inspections to give defendants an opportunity to head off a criminal prosecution for violation of the Act. See 21 U.S.C. § 335; 21 C.F.R. § 7.84 (1982). Defendants' motion to suppress is based on the allegation that at the time of each hearing the FDA had already recommended prosecution for the alleged violations that gave rise to the hearing. They contend that if statements made at such a hearing are not given adequate consideration before a...

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