755 F.3d 125 (2nd Cir. 2014), 12-240-cr, United States v. Ganias

Docket Nº:12-240-cr
Citation:755 F.3d 125
Opinion Judge:Chin, Circuit Judge
Party Name:UNITED STATES OF AMERICA, Appellee, v. STAVROS M. GANIAS, Defendant-Appellant
Attorney:SARALA V. NAGALA, Assistant United States Attorney (Anastasia E. King and Sandra S. Glover, Assistant United States Attorneys, on the brief), for David B. Fein, United States Attorney for the District of Connecticut, New Haven, Connecticut, for Appellee. STANLEY A. TWARDY, JR. (Daniel E. Wenner, ...
Judge Panel:Before: HALL and CHIN, Circuit Judges, and RESTANI, Judge.[*] Judge Hall concurs in part and dissents in part in a separate opinion. CONCUR BY: PETER W. HALL (In Part) Peter W. Hall, Circuit Judge, concurring in part and dissenting in part:
Case Date:June 17, 2014
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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Page 125

755 F.3d 125 (2nd Cir. 2014)

UNITED STATES OF AMERICA, Appellee,

v.

STAVROS M. GANIAS, Defendant-Appellant

No. 12-240-cr

United States Court of Appeals, Second Circuit

June 17, 2014

Argued April 11, 2013

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Appeal from a judgment of the United States District Court for the District of Connecticut convicting defendant-appellant, following a jury trial, of tax evasion. Defendant-appellant appeals on the grounds that: (1) the district court (Thompson, J.) erred in denying his motion to suppress his personal computer records, which had been retained by the Government for more than two-and-a-half years after it copied his computer hard drives pursuant to a search warrant calling for the seizure of his clients' business records; and (2) the district court (Burns, J.) abused its discretion in failing to order a new trial where a juror posted comments about the trial on his Facebook page and became Facebook friends with another juror during the trial. We find no abuse of discretion as to the second issue, but we conclude, however, that defendant-appellant's Fourth Amendment rights were violated by the unauthorized retention of his personal files. Accordingly, we vacate the judgment and remand for further proceedings.

SARALA V. NAGALA, Assistant United States Attorney (Anastasia E. King and Sandra S. Glover, Assistant United States Attorneys, on the brief), for David B. Fein, United States Attorney for the District of Connecticut, New Haven, Connecticut, for Appellee.

STANLEY A. TWARDY, JR. (Daniel E. Wenner, on the brief), Day Pitney LLP, Stamford, Connecticut, for Defendant-Appellant.

Before: HALL and CHIN, Circuit Judges, and RESTANI, Judge.[*] Judge Hall concurs in part and dissents in part in a separate opinion.

OPINION

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Chin, Circuit Judge

In this case, defendant-appellant Stavros M. Ganias appeals from a judgment convicting him, following a jury trial, of tax evasion. He challenges the conviction on the grounds that his Fourth Amendment rights were violated when the Government copied three of his computer hard drives

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pursuant to a search warrant and then retained files beyond the scope of the warrant for more than two-and-a-half years. He also contends that his right to a fair trial was violated when, during the trial, a juror posted comments about the case on his Facebook page and " friended" another juror. We reject the second argument but hold that the Government's retention of the computer records was unreasonable. Accordingly, we vacate the conviction and remand for further proceedings.

STATEMENT OF THE CASE

A. The Facts 1

In the 1980s, after working for the Internal Revenue Service (" IRS" ) for some fourteen years, Ganias started his own accounting business in Wallingford, Connecticut. He provided tax and accounting services to individuals and small businesses. In 1998, he began providing services to James McCarthy and two of McCarthy's businesses, American Boiler and Industrial Property Management (" IPM" ). IPM had been hired by the Army to provide maintenance and security at a vacant Army facility in Stratford, Connecticut.

In August 2003, the Criminal Investigative Command of the Army received a tip from a confidential source that individuals affiliated with IPM were engaging in improper conduct, including stealing copper wire and other items from the Army facility and billing the Army for work that IPM employees performed for American Boiler. The source alleged that evidence of the wrongdoing could be found at the offices of American Boiler and IPM, as well as at the offices of " Steve Gainis [sic]," who " perform[ed] accounting work for IPM and American Boiler." 2

Based on this information, the Army commenced an investigation. Army investigators obtained several search warrants, including one to search the offices of Ganias's accounting business. The warrant, issued by the United States District Court for the District of Connecticut and dated November 17, 2003, authorized the seizure from Ganias's offices of:

All books, records, documents, materials, computer hardware and software and computer associated data relating to the business, financial and accounting operations of [IPM] and American Boiler . . . .

The warrant was executed two days later. Army computer specialists accompanied investigators to Ganias's offices and helped gather the electronic evidence. The agents did not seize Ganias's computers; instead, the computer specialists made identical copies, or forensic mirror images, of the hard drives of all three of Ganias's computers. As a consequence, the investigators copied every file on all three computers -- including files beyond the scope of the warrant, such as files containing Ganias's personal financial records. Ganias was present as the investigators collected the evidence, and he expressed concern about the scope of the seizure. In response, one agent " assured" Ganias that the Army was only looking for files " related to American Boiler and IPM." Everything else, the agent explained, " would be purged once they completed their search" for relevant files.

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Back in their offices, the Army computer specialist copied the data taken from Ganias's computers (as well as data obtained from the searches of the offices of IPM and American Boiler) onto " two sets of 19 DVDs," which were " maintained as evidence." Some eight months later, the Army Criminal Investigation Lab finally began to review the files.

In the meantime, while reviewing the paper documents retrieved from Ganias's offices, the Army discovered suspicious payments made by IPM to an unregistered business, which was allegedly owned by an individual who had not reported any income from that business. Based on this evidence, in May 2004, the Army invited the IRS to " join the investigation" of IPM and American Boiler and gave copies of the imaged hard drives to the IRS so that it could conduct its own review and analysis. The Army and the IRS proceeded, separately, to search the imaged hard drives for files that appeared to be within the scope of the warrant and to extract them for further review.

By December 2004, some thirteen months after the seizure, the Army and IRS investigators had isolated and extracted the computer files that were relevant to IPM and American Boiler and thus covered by the search warrant. The investigators were aware that, because of the constraints of the warrant, they were not permitted to review any other computer records. Indeed, the investigators were careful, at least until later, to review only data covered by the November 2003 warrant.

They did not, however, purge or delete the non-responsive files. To the contrary, the investigators retained the files because they " viewed the data as the government's property, not Mr. Ganias's property." Their view was that while items seized from an owner will be returned after an investigation closes, all of the electronic data here were evidence that were to be protected and preserved. As one agent testified, " [W]e would not routinely go into DVDs to delete data, as we're altering the original data that was seized. And you never know what data you may need in the future. . . . I don't normally go into electronic data and start deleting evidence off of DVDs stored in my evidence room." The computer specialists were never asked to delete (or even to try to delete) those files that did not relate to IPM or American Boiler.

In late 2004, IRS investigators discovered accounting irregularities regarding transactions between IPM and American Boiler in the paper documents taken from Ganias's office. After subpoenaing and reviewing the relevant bank records in 2005, they began to suspect that Ganias was not properly reporting American Boiler's income. Accordingly, on July 28, 2005, some twenty months after the seizure of his computer files, the Government officially expanded its investigation to include possible tax violations by Ganias. Further investigation in 2005 and early 2006 indicated that Ganias had been improperly reporting income for both of his clients, leading the Government to suspect that he also might have been underreporting his own income.

At that point, the IRS case agent wanted to review Ganias's personal financial records and she knew, from her review of the seized computer records, that they were among the files in the DVDs copied from Ganias's hard drives. The case agent was aware, however, that Ganias's personal financial records were beyond the scope of the November 2003 warrant, and consequently she did not believe that she could review the non-responsive files, even though they were already in the Government's possession.

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In February 2006, the Government asked Ganias and his counsel for permission to access certain of his personal files that were contained in the materials seized in November 2003. Ganias did not respond, and thus, on April 24, 2006, the Government obtained another warrant to search the preserved images of Ganias's personal financial records taken in 2003. At that point, the images had been in the Government's possession for almost two-and-a-half years. Because Ganias had altered the original files shortly after the Army executed the 2003 warrant, the evidence obtained in 2006 would not have existed but for the Government's retention of those images.

B. Procedural History

1. The Indictment

In October 2008, a grand jury indicted Ganias and McCarthy for conspiracy and tax evasion. The grand jury returned a superseding indictment in December 2009, containing certain counts relating to McCarthy's taxes and two counts relating to Ganias's personal taxes. The latter two counts were asserted only against...

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