People v. Wakefield Financial Corp.

• Decision Date: 12 August 1992
• Citation: 590 N.Y.S.2d 382,155 Misc.2d 775
• Parties: The PEOPLE of the State of New York, v. WAKEFIELD FINANCIAL CORPORATION, et al., Defendants. The PEOPLE of the State of New York, v. Raymond KOUBECK, et al., Defendants. The PEOPLE of the State of New York, v. Howard CITRON, et al., Defendants.
• Court: New York Supreme Court

Page 382

590 N.Y.S.2d 382

155 Misc.2d 775

The PEOPLE of the State of New York, v. WAKEFIELD FINANCIAL CORPORATION, et al., Defendants.

The PEOPLE of the State of New York, v. Raymond KOUBECK, et al., Defendants.

The PEOPLE of the State of New York, v. Howard CITRON, et al., Defendants.

Supreme Court, New York County,

Part 49.

Aug. 12, 1992.

[155 Misc.2d 776] Michael F. Bachner, New York City, for Phillip Ardizzone.

Brian Barrett, New York City, for Theresa Crescenzi.

Steven Bernstein, New York City, for Kenneth Stoops.

David Blackstone, Polly Passonneau, New York City, for Theresa Fiorillo.

John F. Felton, New York City, for Parsons Eng.

Virgil W. Hervey, Hervey, Matsoukas & Schuman, New York City, for Keith Friedman.

George J. Kundrat, Westfield, N.J., for Howard Edrich.

Lawrence A. Mandelker, Kantor Davidoff Wolfe Rabbino & Cass, New York City, for George Kevorkian, G.K. Scott, John Kevorkian.

Thomas C. Moore, G. Michael Bellinger, Karen E. Clarke, Sheila M. Gowan, Proskauer Rose Goetz & Mendelsohn, New York City, for Joseph Elkind.

Francis J. Murray, Rockville Centre, for Al Minella and Wakefield Financial.

Darrell Paster, Berger, Poppe, Janiec & Mackasek, New York City, for Morton Kantrowitz.

David Perlmutter, Deana Fisher, New York City, for Joseph Zaborowski.

Robert Romano, Arda Arslanian, Morgan, Lewis & Bockius, New York City, for Keith Minella, Kelly Trading.

Stanley B. Thomas, New York City, for Donato Delvecchio.

Jesse Zaslav, New York City, for Howard Edrich.

Asst. Dist. Atty. Rubie Mages, Office of Dist. Atty., Robert M. Morgenthau, Dist. Atty., New York City, for People.

JOHN A.K. BRADLEY, Justice.

The defendants are charged in three indictments with manipulating the over-the-counter stock market. Included among the defendants are three securities firms and fifteen individual defendants. The most significant count charges the crime of enterprise corruption in that from on or about September 18, 1987, through on or about February 14, 1990, the defendants having knowledge of the existence of a criminal enterprise and the nature of its activities, and being members of and associated with that criminal enterprise, intentionally conducted and participated in the affairs of the enterprise by participating in a pattern of criminal activity. Specifically, the defendants a group of ostensibly independent, competitive securities firms and individuals are charged with acting together as a single criminal enterprise secretly rigging trading in certain securities some of which were traded on NASDAQ and some were listed on the "pink sheets" (daily listings of over-the-counter stocks), fraudulently concealing collusive transactions, creating a false appearance that certain quotations in the NASDAQ system were honestly set, providing false financial information and other activities. The defendants are also charged with numerous counts of falsifying business records, grand larceny, conspiracy and other crimes.

The defendants have moved to dismiss the indictments on numerous grounds. The motion is denied in part, as follows: ...

THE MOTION TO SUPPRESS THE WIRETAP EVIDENCE

Standing

During the course of this investigation, the People made use of electronic surveillance, specifically wiretapping. The defendants have all moved to suppress the results of the electronic surveillance. Section 710.20 of the CPL provides that a defendant who has been "aggrieved by unlawful or improper acquisition of evidence" may seek to suppress it. This includes evidence obtained as a result of electronic eavesdropping. See CPL 710.20(2). An aggrieved person includes, pursuant to CPL 710.10(5), those persons set out in CPLR 4506(2). CPLR 4506 refers to senders or receivers of electronic communications, parties to such communications, and persons against whom the eavesdropping was directed.

Applying these principles to the interception of telephone conversations, the courts have established a well settled rule that standing to challenge such communications requires that either the movant have been heard on the phone, or that it was his telephone that was tapped. U.S. v. Burford, 755 F.Supp. 607 (S.D.N.Y.1991); U.S. v. Fury, 554 F.2d 522 (2d Cir.1977) cert.

den. Fury v. United States, 436 U.S. 931, 98 S.Ct. 2831, 56 L.Ed.2d 776 (1978); People v. Edelstein, 54 N.Y.2d 306, 445 N.Y.S.2d 125, 429 N.E.2d 803 (1981); People v. Contento, 146 A.D.2d 959, 537 N.Y.S.2d 88 (1989); People v. Konyack, 99 A.D.2d 588, 471 N.Y.S.2d 699 (1984).

As outlined above, the first warrant was issued by Appellate Division Presiding Justice Mollen on May 6, 1988 and was directed against the phones of one Howard Citron formerly a defendant in this case who has now pleaded guilty. The Citron warrant was extended on June 2, 1988 and July 1, 1988. On July 20, 1988 warrants were obtained against phone lines of Wakefield in White Plains and New York. These warrants were issued by Justice Mollen and this Court. These warrants were extended on August 16, 1988 and September 14, 1988.

The defendants seek to suppress the eavesdropping evidence based on infirmities in the Citron warrants, and extensions thereof. Defendant Minella, and only he of the remaining defendants, has standing to challenge the original Citron wiretap, as he was intercepted in overheard conversations. Further as to the extensions of the Citron warrant, for similar reasons defendants Minella and Eng have standing. The People argue correctly, however, that while other defendants may have standing to challenge the subsequent Wakefield warrants on a number of grounds, they may not reach back to challenge the Citron warrants, as to which they otherwise did not have standing, on some theory that the subsequent warrants were the fruit of a poisonous tree (and that they may therefore attack the tree itself). See People v. Troia, 104 A.D.2d 389, 478 N.Y.S.2d 715 (1984); People v. LaRocca, 112 A.D.2d 1010, 492 N.Y.S.2d 647 (1985). In LaRocca, the police had conducted eavesdropping and learned of the possible illegal activities of one Pelose. They then obtained a warrant to tap Pelose's phones, at which time they recorded LaRocca. The Court denied LaRocca the right to challenge the original warrants on the grounds that he had no standing, having neither been tapped nor intercepted. As to the later warrant, he of course had standing, but the fact that the results of the original warrant had led to the later warrant did not justify the defendant reaching back to challenge the original warrant.

To permit this, as the defendants suggest, would eviscerate the standing rule and create great anomalies. Thus, if the defendants were correct, someone mentioned on a wiretap not directed at his phone (nor in which he was intercepted) and later indicted without further electronic surveillance, could not challenge the wiretap, but an identical defendant who was later intercepted on a subsequent wiretap could challenge not only the later interception but also the original one. There is no basis for such a rule and this Court will not adopt it. In People v. Koutnik, 44 A.D.2d 48, 353 N.Y.S.2d 197 (First Dept., 1974) aff'd, 37 N.Y.2d 873, 378 N.Y.S.2d 360, 340 N.E.2d 727 (1975), cited by the defendants, the parties had reached a stipulation as to standing with respect to 107 warrants. To the extent that the Courts in People v. Amsden, 82 Misc.2d 91, 368 N.Y.S.2d 433 (Sup.Ct., Erie Co., 1975) and People v. Brown, 80 Misc.2d 777, 364 N.Y.S.2d 364 (Sup.Ct., N.Y. Co., 1975) reach a result different from this Court, this Court respectfully disagrees.

Finally, similar principles govern the standing to challenge minimization, see People v. Sergi, 96 A.D.2d 911, 466 N.Y.S.2d 93 (1983), and the Court's holding is equally applicable thereto.

THE NECESSITY FOR ELECTRONIC EAVESDROPPING

The defendants argue that the people have failed to demonstrate that less intrusive means of investigation than electronic eavesdropping were not appropriate. Thus, defendants urge, the wiretapping was inappropriate and must be suppressed.

Pursuant to CPL 700.15(4) and 700.20(2)(d) an application for an eavesdropping warrant must contain "[a] full and complete statement of facts establishing that normal investigative procedures have been tried and have failed or reasonably appear The statute is designed to ensure that wiretapping is not the routine initial method of investigation, but there is no requirement that it be only the last resort, or that all other imaginable means of investigation have been absolutely and completely exhausted. United States v. Giordano, 416 U.S. 505, 94 S.Ct. 1820, 40 L.Ed.2d 341 (1974); United States v. Bailey, 607 F.2d 237 (9th Cir.1979); People v. Gallina, 95 A.D.2d 336, 466 N.Y.S.2d 414 (1983).

to be unlikely to succeed if tried or to be too dangerous to employ, to obtain the evidence sought."

As the court in People v. Baris, 116 A.D.2d 174, 187, 500 N.Y.S.2d 572 (1986) app'l den. 67 N.Y.2d 1050, 504 N.Y.S.2d 1025, 495 N.E.2d 358 (1986), held:

The case law establishes that eavesdropping warrants should not be used routinely as a first step in the investigation (People v. Gallina, 95 AD2d 336 . However, the police do not have to exhaust all possible steps before requesting an eavesdropping warrant and wiretapping does not have to be the last resort (People v. Carson, 99 AD2d 664 [472 N.Y.S.2d 68 (1984) ]; see United States v. Fury, 554 F2d 522, 530 n. 7, supra; People v. Versace, 73 AD2d 304, 307-308 [426 N.Y.S.2d 61 (1980) ]. The issuing court must be apprised of the nature, progress and difficulties in the investigation to insure that eavesdropping is more than just a "useful tool" (People v. Gallina, supra [95 A.D.2d] p. 340 ; People v. Carson, supra; People v. Versace, supra). The court must test the People's showing in a practical and common-sense fashion in the context of the objectives of the investigation (United States v. Lilla, 699 F2d 99, 103 [2d Cir. (1983) ]; People v. Rumpel, ...