971 F.2d 854 (2nd Cir. 1992), 1151, United States v. Eng

Docket Nº:1151, Docket 91-1683.
Citation:971 F.2d 854
Party Name:UNITED STATES of America, Appellee, v. Shu Yan ENG, also known as Ah Shu; Cho-Kuen Wong; King Albeo Kong; Foo Wing Yam; Sue Sang Ong; Hon Keung Ng, Defendants, Shu Yan ENG, also known as Ah Shu, Defendant-Appellant.
Case Date:July 28, 1992
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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971 F.2d 854 (2nd Cir. 1992)

UNITED STATES of America, Appellee,

v.

Shu Yan ENG, also known as Ah Shu; Cho-Kuen Wong; King

Albeo Kong; Foo Wing Yam; Sue Sang Ong; Hon

Keung Ng, Defendants,

Shu Yan ENG, also known as Ah Shu, Defendant-Appellant.

No. 1151, Docket 91-1683.

United States Court of Appeals, Second Circuit

July 28, 1992

Argued April 2, 1992.

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Faith E. Gay, Asst. U.S. Atty., New York City (Andrew Maloney, U.S. Atty., Eastern District of New York, Susan Corkery, Asst. U.S. Atty., New York City, of counsel), for appellee.

Margaret E. Alverson, New York City (Herbert V. Larson, Jr., New York City, of counsel), for defendant-appellant.

Before MINER and McLAUGHLIN, Circuit Judges, and MARTIN, District Judge. [*]

MINER, Circuit Judge:

Defendant-appellant Shu Yan Eng appeals from a judgment of conviction entered in the United States District Court for the Eastern District of New York (Glasser, J.) on November 13, 1991. Eng was convicted, after a jury trial, of tax evasion for the tax years 1986 through 1988, see 26 U.S.C. § 7201. The district court sentenced Eng to a term of imprisonment of 48 months but granted Eng bail pending this appeal. The conviction followed the district court's denial of Eng's motion to suppress certain records obtained by the government in an unlawful search and other evidence claimed by Eng to have been derived from materials discovered in the unlawful search.

The district court based its denial of Eng's motion on the "inevitable discovery" doctrine, recognized by the Supreme Court in Nix v. Williams, 467 U.S. 431, 104 S.Ct. 2501, 81 L.Ed.2d 377 (1984), as an exception to the exclusionary rule. Eng contends that the government failed to meet its burden under Nix of proving by a preponderance of the evidence that absent the unlawful search, lawful discovery of the challenged evidence was inevitable. Specifically, Eng argues that the government's version of what evidence would have been discovered absent the search is too speculative,

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and that our ruling in United States v. Roberts, 852 F.2d 671 (2d Cir.), cert. denied, 488 U.S. 993, 109 S.Ct. 556, 102 L.Ed.2d 583 (1988), prohibits the government from relying on the use of subpoenas in meeting its burden of proof.

Our consideration of the issues presented by this case is hindered by the lack of specific factual determinations by the district court. Accordingly, we vacate the judgment of conviction and remand this case to the district court for particularized findings as to the manner in which, if at all, each piece of evidence challenged by Eng, and said by the government to be admissible under the inevitable discovery exception, would have been inevitably discovered.

BACKGROUND

I. Events Prior to the Unlawful Search

In February 1989, Eng came under investigation by the Drug Enforcement Administration and the Internal Revenue Service ("IRS") for suspected narcotics and money laundering violations. The investigation began after informants indicated that Eng was importing large quantities of narcotics from the Far East and laundering money through various businesses and properties in the United States. As is customary following commencement of narcotics and money laundering investigations, the IRS began a tax evasion investigation of Eng in August or September 1989. The investigation was conducted by IRS Agent Thomas Interdonato. Interdonato used the "expenditures method" of proof, which premises a tax evasion case on a comparison between the taxpayer's income and non-taxable resources, such as gifts and loans, and the taxpayer's expenditures. The government is constrained under this method to show that non-taxable sources of funds spent by the taxpayer did not exist, a burden that involves a thorough search of assets, sources of money, and cash inflows and outflows. See generally United States v. Bianco, 534 F.2d 501 (2d Cir.), cert. denied, 429 U.S. 822, 97 S.Ct. 73, 50 L.Ed.2d 84 (1976). Prior to the unlawful search, the following items had been identified by Interdonato:

  1. Eng's Personal Bank Accounts

    It appears that Interdonato began his investigation with Eng's personal tax returns, which were prepared by Wang F. Luk, an accountant. The interest income information reported on Eng's tax returns indicated that Eng had personal bank accounts in New York at Manhattan Savings Bank, Hang Seng Bank, National Westminster Bank, and Bowery Bank. However, Interdonato had no account numbers. Bowery Bank was subpoenaed for account records but responded (erroneously, as it later turned out) that it had no account for Eng.

  2. 134 Gauldy Avenue

    Eng's tax returns indicated that Eng resided at 134 Gauldy Avenue, in Staten Island, New York. As regards this property, Interdonato performed a title search which revealed the identity of a mortgagee, Long Island Savings Bank. In response to a subpoena, the mortgagee produced Eng's mortgage application, payment history and the amount due on the mortgage.

  3. 141 Division Street

    Interdonato had confidential information that Eng owned a condominium at 141 Division Street in New York City.

  4. 26 Bowery and Chinese Moon

    The government possessed confidential information that Eng was President of Chinese Moon Palace Restaurant, Inc., located in the 26 Bowery building in New York City. Interdonato performed a title search on the 26 Bowery building and discovered that the building had been sold in December 1986, by a corporation called 26 Bowery Corp., to a corporation called Bowery Mansion, Inc. The title search also revealed that the selling corporation's attorney was Ronald De Petris, Esq., and that Eng was President of Bowery Mansion. Interdonato then obtained the certificate of incorporation and tax returns for Bowery Mansion, and the corporate tax returns for Chinese

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    Moon, which confirmed much of the foregoing information. The Chinese Moon tax returns listed a bank account at National Westminster Bank. Interdonato subpoenaed National Westminster Bank for Chinese Moon account records, obtaining monthly statements and information on deposits. These documents showed that cashier's checks, totalling $140,000 and issued by Hang Seng Bank, had been deposited to Chinese Moon's account in June and September of 1987. Through the government's Treasury Enforcement Communication System, Interdonato further learned of two large cash deposits of $20,000 and $12,000 to Chinese Moon's account.

    II. The Unlawful Search

    On October 18, 1989, about two months after the commencement of Interdonato's investigation, Eng was arrested in connection with an indictment charging him with administering a continuing criminal enterprise, money laundering, and a variety of narcotics violations. Eng was not charged with tax evasion at that time. On the date of Eng's arrest, authorities seized the 26 Bowery building, as well as one of Eng's businesses, the French Ice Cream Parlor, located on Mott Street in New York City. Eng's personal safe in the French Ice Cream Parlor was searched without a warrant, and a variety of materials was seized from the safe. The government concedes that the search was unlawful.

    The materials seized from the safe included: (A) cancelled checks and other documents containing the account numbers of Eng's personal bank accounts at Manhattan Savings Bank, Hang Seng Bank, National Westminster Bank and Bowery Bank; (B) customer records of money orders payable to Long Island Savings Bank, the money orders having been used by Eng to make mortgage payments on the 134 Gauldy Avenue home; (C) documents relating to the 141 Division Street condominium, revealing among other things the condominium unit number; (D) documents relating to the purchase of the 26 Bowery building, and showing that Sol Leitner and Frieda Grant were the owners of 26 Bowery Corp. (the seller of the 26 Bowery building); (E) the National Westminster Bank checkbook of a corporation called World Express International, Inc.; (F) documents evidencing Eng's ownership of a boat and a home at 15 Collingwood Lane, in Palm Coast, Florida; and (G) additional customer records of money orders, these money orders having been used by Eng to pay a variety of expenses.

    III. Events Subsequent to the Unlawful Search

    In the months following the search of Eng's safe, Interdonato:

    (A) subpoenaed the banks at which Eng maintained personal accounts, and thereby obtained statements and records for the accounts;

    (B) performed a title search on the 141 Division Street condo. The title search revealed the identities of the seller and seller's attorney, who were then subpoenaed by Interdonato. These subpoenas produced documents showing that Eng had purchased the condo in December 1988 for $200,000 cash;

    (C) subpoenaed the principals of 26 Bowery Corp. and its attorney, and received closing documents relating to the sale of the 26 Bowery building. Another subpoena was issued to Frank Lam, one of Eng's corporate lawyers, who produced checks used to pay 26 Bowery Corp. in the transaction. The total mix of information revealed that Bowery Mansion paid $1.7 million for the 26 Bowery building, half of which was paid in cash, and half of which was financed by a mortgage given to 26 Bowery Corp. by Bowery Mansion;

    (D) subpoenaed Hang Seng Bank, the source of the cashier's checks deposited to Chinese Moon's National Westminster Bank account. Documents produced by Hang Seng revealed that the cashier's checks originated with parties in Hong Kong;

    (E) subpoenaed National Westminster Bank for records relating to World Express. This subpoena provided Interdonato with information that between August and November 1986, and again in September

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    1987, cashier's checks were deposited and wire transfers made into the World Express account, from Wing Lung Bank, Kwantung Provincial Bank, and the Bank of Credit and Commerce International. These transfers totaled about $1...

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