Stonehill v. United States

• Citation: 405 F.2d 738
• Decision Date: 04 February 1969
• Docket Number: No. 22346.,22346.
• Parties: Harry S. STONEHILL and Robert P. Brooks, Appellants, v. UNITED STATES of America, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

405 F.2d 738 (1968)

Harry S. STONEHILL and Robert P. Brooks, Appellants, v. UNITED STATES of America, Appellee.

No. 22346.

United States Court of Appeals Ninth Circuit.

December 9, 1968.

Rehearing Denied February 4, 1969.

Bertram H. Ross (argued), Los Angeles, Cal., Trammel, Rand & Nathan, Washington, D. C., for appellants.

John J. McCarthy (argued), Lee A. Jackson, Joseph M. Howard, Jerome H. Fridkin, Dept. of Justice, Mitchell Rogovin, Asst. Atty. Gen., Washington, D. C., Wm. M. Byrne, U. S. Atty., Loyal E. Keir, Asst. U. S. Atty., Los Angeles, Cal., for appellee.

Before CHAMBERS and BROWNING, Circuit Judges, and^* BELLONI, District Judge.

BELLONI, District Judge.

This appeal¹ is from an interlocutory order of the United States District Court for the Central District of California which denied appellants' motion to suppress evidence in a civil action brought by the United States of America.

The United States, in January, 1965, filed a complaint seeking foreclosure of Federal tax liens securing Federal income tax liabilities outstanding against Harry S. Stonehill and Robert P. Brooks for 1958 through 1961, inclusive. Taxpayers (appellants Stonehill and Brooks) moved to suppress certain evidence they claimed had been obtained in violation of taxpayers' Constitutional rights.

The trial court held a hearing on the motion, later entering its written order and opinion denying the motion to suppress. United States v. Stonehill, 274 F.Supp. 420. Subsequently, the trial court granted a certificate under 28 U.S.C. § 1292(b); taxpayers then petitioned for and were granted permission from this court to appeal from the order.

The question before this court is whether the district court erred in denying taxpayers' motion to suppress. Taxpayers contend that the documents in question should have been suppressed as evidence even if seized by foreign officers in a foreign country, because the searches and seizures were illegal by United States Constitutional standards (in violation of the Fourth Amendment). Taxpayers contend also that the district court erred in concluding that the action of United States agents did not constitute United States "participation" in the illegal searches and seizures. We find no merit to these contentions and affirm the district court's order.²

STATEMENT OF FACTS

Taxpayers' motion seeks to suppress numerous documents seized in the Philippines during raids which began March 3, 1962. Better understanding of the issues, however, requires that we examine events which took place over a period of several years. During the tax years in question, taxpayers Stonehill and Brooks were American citizens residing in the Philippines. The tax investigation on which the assessments are based had its inception in the Philippine Islands.

Stonehill and Brooks began business together in the Philippines shortly after World War II and developed a substantial number of businesses, including the United States Tobacco Company. They were officers of, or controlled, many successful corporations. As the district court so aptly stated:

"So eminently successful were they in ascending the ladder of finance that they brought themselves and their activities to the attention of the Philippine authorities and to the attention of the United States Internal Revenue Service." 274 F.Supp. at p. 421.

Robert Chandler was attached to the United States Embassy in Manila as the Internal Revenue Service representative for the Far East. His duties included auditing returns of and collecting taxes from American taxpayers residing in his territory. In 1960, the income tax return of Harry S. Stonehill for the calendar year 1958 was sent to Chandler for audit. Due to lack of personnel, the audit was not conducted. Nothing further was done.

Menhart Spielman had been vice-president of United States Tobacco Company until his discharge by Stonehill and Brooks; before leaving the tobacco company he copied and photographed certain documents and records which he felt disclosed wrongdoing on the part of taxpayers. In December, 1961, Spielman contacted Robert Hawley, a Federal Bureau of Investigation agent attached to the American Embassy in Manila, who in turn directed him to Chandler.

After Chandler met Spielman on December 18, 1961, he concluded that Spielman's information indicated possible tax liabilities due from the taxpayers and that the information might be of interest to the Philippine authorities. On December 22, 1961, Chandler relayed Spielman's information to his office in Washington, D. C., also telling them that any tax investigation was beyond his office's capabilities, and recommending that additional agents be assigned. Chandler spent considerable time with Spielman collecting information, repeatedly asking his headquarters for assistance.

Chandler and Hawley finally persuaded Spielman to meet with the Philippine authorities; on January 27, 1962, Spielman met with Colonel Lukban, who was in charge of the Philippine National Bureau of Investigation. For some time prior to this meeting, the Philippine National Bureau of Investigation (NBI) had been investigating Stonehill and Brooks, gathering evidence which they hoped to use in deporting Stonehill and Brooks from the Philippines as undesirable aliens.

Philippine authorities, as part of their deportation investigation, decided to raid the taxpayers' business premises. Upon learning of the proposed raids, Robert Chandler objected, requesting that such action not be taken or that it at least be postponed. His request was disregarded. Philippine authorities began planning the raids, and because Chandler and Col. Lukban were friends, some of the numerous preparation meetings were held in Chandler's home. Because Spielman was afraid to go to NBI headquarters, meetings between Spielman and the NBI were also held in Chandler's home.

Chandler did not assist in planning the raids, although at one NBI meeting when Chandler was present he did ask if the Army-Navy Club was included on the list of premises to be raided. The information furnished Chandler and the NBI by Spielman was the basis for this question. Chandler suggested including this building; when the raids were conducted it was included.

Under the supervision of Col. Lukban and Jose Diokno (the then-Secretary of Justice for the Republic of the Philippines), the NBI made all the preparations for these raids. In the process of relaying information from Spielman, a diagram prepared by Chandler of one premises and a memorandum prepared by him on another inadvertently fell into the hands of the NBI. They were not intended as directions to the NBI.

The night before the raids Chandler was called to Col. Lukban's home. A large number of NBI personnel were also present. Chandler was shown a paper described as a warrant and was asked for his comment. He said he knew nothing about search warrants but that the copy appeared to be all right. At this point Chandler made his inquiry about the Army-Navy Club.

After the Philippine authorities decided to conduct the raids, but prior to the raids, Chandler secured permission from Col. Lukban to examine and copy records seized in the raids. However, it is clear that the purpose of the raids was to uncover violations of Philippine law, not to obtain evidence for the United States agents.

The raids on the taxpayers and their corporations commenced Saturday, March 3, 1962, at about 1:00 P.M., at which time the taxpayers were arrested and 200 NBI agents simultaneously raided the business offices of the taxpayers and some 17 different corporations. The NBI took possession of the various corporate premises and began to gather the voluminous documents and records seized in the raids, a process which took from several hours at some locations to several days at others.

When the raids started, Robert Chandler and two agents from his office went to a small temporary structure owned by the NBI across the street from NBI headquarters to wait for the conclusion of the raids, hoping to obtain from the NBI any records which were seized. They remained there all afternoon, and at about 5:00 P.M. read in the evening paper that the taxpayers had been arrested and their various businesses raided, which lead them to believe the raids were completed. About 10:00 P.M. that evening, Col. Lukban asked them to come to his office. There they saw a large volume of records and documents which had been seized in the raids and requested permission to copy or photograph some of them. The request was denied, Col. Lukban indicating that the seized records and documents would not be made available until they had been examined, catalogued, and inventoried by the NBI. The next day arrangements were made to permit Robert Chandler to photograph or copy some of the documents.

While Chandler and his associates were in Col. Lukban's office, an NBI agent requested the assistance of an accountant to determine which records, from a large number seized in a warehouse of the United States Tobacco Company, were significant; there were too many to bring to NBI headquarters and the NBI agent did not know what to pick up. Col. Lukban asked Chandler to go to the warehouse to help the NBI agent. Chandler agreed. Chandler and two associates went to the warehouse, pointed out the books and records which appeared to be the most significant from an accounting point of view, and left. They made no detailed examination of the records, took no records with them, and did not know what was done with these records after they left.

Chandler drove from the warehouse to the main office of the United States Tobacco Company, several blocks away, and asked the NBI agent in charge if they had found the record storage room Spielman had told both Chandler and the NBI about. The NBI agent did not seem to know about it and asked Chandler to point it out. Chandler stepped into the office, pointed out generally the location of the record storage area,...