U.S. v. Binder, s. 85-2561

• Decision Date: 30 June 1986
• Docket Number: 85-2562,Nos. 85-2561,s. 85-2561
• Citation: 794 F.2d 1195
• Parties: 20 Fed. R. Evid. Serv. 1373 UNITED STATES of America, Plaintiff-Appellee, v. Aaron M. BINDER and Frederick G. Celani, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1195

794 F.2d 1195

20 Fed. R. Evid. Serv. 1373

UNITED STATES of America, Plaintiff-Appellee, v. Aaron M. BINDER and Frederick G. Celani, Defendants-Appellants.

Nos. 85-2561, 85-2562.

United States Court of Appeals Seventh Circuit.

Argued April 15, 1986.

Decided June 30, 1986.

Michael Kopec, Esq., Jon Gray Noll, Springfield, Ill., for defendants-appellants.

Richard N. Cox, U.S. Atty., Gerald D. Fines, U.S. Atty., Springfield, Ill., for plaintiff-appellee.

Before CUMMINGS, Chief Judge, BAUER, Circuit Judge and MAROVITZ, Senior District Judge ^*.

BAUER, Circuit Judge.

Defendants Frederick G. Celani and Aaron M. Binder appeal from their convictions for racketeering, conspiracy to commit racketeering, wire fraud, mail fraud, and the interstate transportation of property obtained by fraud. Celani was sentenced to 15 years imprisonment to be followed by 5 years probation, and Binder was sentenced to ten years imprisonment to be followed by 5 years probation. Additionally, both were ordered to pay restitution, either jointly or separately, in the amount of $404,000. On appeal, the defendants argue that the government illegally seized documents from their business offices and that they were improperly denied certain services, including appointed counsel for Celani, necessary to ensure that they received a fair trial. We affirm the defendants' convictions.

I.

The defendants' convictions resulted from a fraudulent tax shelter scheme and a fraudulent business scheme. The tax shelter scheme centered on the activities of Celani, Celani & Associates (CCA), which the defendants incorporated in 1981 and for which they served as principal stockholders and major officers. CCA was first located in Encino and later in Sherman Oaks, California. The defendants represented CCA to the public as a high technology engineering firm specializing in the creation of research and development limited partnerships. Celani claimed to be a mechanical engineer with 14 years experience and to possess advanced degrees from several well known universities, including a Ph.D. from the "University of England, Oxford" [sic]. CCA's sole source of income during its brief existence came from investors who bought its limited partnerships as tax shelters. In 1981 and 1982 these sales amounted to approximately $3.8 million. During those two years, the defendants filed tax returns for 26 limited partnerships in which they claimed that they had spent over $14 million in the research and development of the projects.

In actuality, Celani was not a mechanical engineer and possessed none of the college degrees he purported to have earned. Further, the research and development expenses CCA claimed were for nothing more than concocting sham models of supposedly high technology products to dupe investors. For example, CCA's research and development of "Porta Laser," a hand-held laser gun, consisted of purchasing a non-working laser for $750, cleaning it, and mounting it for display. The defendants reported to the IRS that the research and development of "Porta Laser" cost $2.7 million. A similar effort was expended in the development of "Satellite Systems, Ltd.," for which the defendants obtained two non-working parabolic dishes from a junkyard, painted them, and mounted them for display. The defendants reported to the IRS that they spent only $700,000 to develop this technological marvel. The printed circulars mailed to investors to generate interest in these projects contained numerous falsehoods as to how their investment money would be spent, most of which actually went to Celani, Binder, and their salespersons.

The business fraud scheme centered on the establishment of an overnight package delivery service, Kayport Package Express. In December 1982, CCA offered a new tax shelter to investors, Kayport Grid Systems, which was purportedly a computerized package sorting and routing process able to greatly reduce the time and costs of current overnight package delivery systems. CCA claimed in its circulars to its investors that Kayport Grid Systems already had a buyer, Kayport Package Express, a division of CCA. Except for a name, it appears that Kayport Package Express had no other attributes of existence at this time.

In January 1983, the defendants met with a number of businesspersons and state and local officials in Springfield, Illinois to discuss the possibility of locating Kayport there. At a meeting on January 10, the defendants represented that CCA had already developed the computer system and purchased delivery vehicles and airplanes. The defendants also stated that they would not seek any financial assistance from the state or local government, but would rely solely on CCA to fund the venture. The defendants then announced that Kayport would locate in Springfield and begin operations March 1, 1983.

Despite their representation that CCA would wholly fund Kayport, CCA salesmen sold over $250,000 worth of stock in Kayport after the January 10 meeting. Further, Kayport investors were told that the State of Illinois and City of Springfield were providing Kayport with financial assistance, that the computer system was already developed, and that Kayport owned a fleet of delivery vehicles and airplanes. In actuality, neither CCA nor Kayport had developed a computer system and Kayport owned no delivery vehicles or airplanes. Kayport began its "operations" on March 1, 1983 with rented planes and equipment and was out of business by March 4.

II.

Binder contends that the government illegally seized documents from the Kayport and CCA offices that were later used to incriminate him. The seizures occurred after grand jury subpoenas were issued for the documents, and the government conducted searches of both offices without a warrant because each premises appeared to have been abandoned. At a pre-trial suppression hearing, the trial court concluded that the Kayport and CCA offices had indeed been abandoned at the time of the searches and denied Binder's motion to exclude the seized documents from evidence. Binder appeals this ruling.

In the widely followed case of United States v. Colbert, 474 F.2d 174 (5th Cir.1973), the Fifth Circuit stated that "[a]bandonment is primarily a question of intent, and intent may be inferred from words spoken, acts done, and other objective facts." 474 F.2d at 176. The Colbert court further stated that

[t]he issue is not abandonment in the strict property-right sense, but whether the person prejudiced by the search had voluntarily discarded, left behind, or otherwise relinquished his interest in the property in question so that he could no longer retain a reasonable expectation of privacy with regard to it at the time of the search.

Id. at 176. The trier of fact's finding that property has been abandoned is reviewable under the clearly erroneous standard. See United States v. Jones, 707 F.2d 1169, 1172 (10th Cir.1983) (citing United States v. Diggs, 649 F.2d 731, 735 (9th Cir.), cert. denied, 454 U.S. 970, 102 S.Ct. 516, 70 L.Ed.2d 387 (1981)).

We first turn to the facts presented at the suppression hearing by the government relating to its warrantless search of the Kayport office on May 17, 1983. Kayport was in "business" for only four days, from March 1 until March 4, 1983. The following Monday, March 7, Celani assembled the employees and informed them that they were laid-off, effective immediately. Celani told them that they would be paid, but they never were. On March 8, Kayport's creditors and the lessors of its equipment repossessed equipment and supplies from the office. On March 9 or 10, Kayport's Director of Security turned over the office keys to the airport management and made arrangements to surrender Kayport's business vehicles to the local credit bureau. Kayport never paid any rent for the office to the airport management.

Before leaving Springfield on or about March 7, Celani removed several boxes of records from the office and the contents of his desk and the company safe. He also consolidated Kayport's four bank accounts into one and withdrew more than $8,000 for himself and his girlfriend. Finally, Celani moved out of his Springfield residence, shipping all of his belongings to Los Angeles. He never returned to Springfield or contacted any of Kayport's employees after leaving, and Kayport never resumed operations.

The government searched the CCA offices in Sherman Oaks, California on April 6, 1983. On March 8, Binder informed all CCA employees that they were dismissed. The following week, CCA requested use of the night elevator from the building manager in order to move out of the premises. The building manager then inspected the offices. Prior to the search, he informed government agents that the offices were "vacant" and that CCA had moved out of the building during the week of March 14. Sometime thereafter the landlord changed the locks on the office doors. At the time CCA left the offices, it was over $13,000 in arrears for February and March rent. On March 22, Celani filed change of address cards with the post office for CCA, Binder, and himself and requested that all mail delivered to the former CCA offices be forwarded to a mail receiving service. He also wrote to all the investors in CCA's "tax shelters" and notified them that CCA was "changing quarters and telephones."

Binder did not dispute any of these facts at the suppression hearing; he disputed only their interpretation. He also offered additional testimony which he contends proved that he and Celani intended to continue their business operations and had only temporarily shut down Kayport and CCA. The day before Kayport ceased operations, Binder went to New York. He testified that his purpose in doing so was to obtain additional financing for Kayport. He also testified that he was attempting to find a buyer for Kayport. Finally, Binder asserts that his filing of a Chapter 11 bankruptcy petition for Kayport on March 15 and 17,...