U.S. v. Davis

• Decision Date: 29 August 2000
• Docket Number: No. 98-51173,98-51173
• Citation: 226 F.3d 346
• Parties: (5th Cir. 2000) UNITED STATES OF AMERICA, Plaintiff - Appellee, v. TONY DAVIS, Defendant - Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

Page 346

226 F.3d 346 (5th Cir. 2000)

UNITED STATES OF AMERICA, Plaintiff - Appellee, v. TONY DAVIS, Defendant - Appellant.

No. 98-51173

IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

August 29, 2000

[Copyrighted Material Omitted] Appeal from the United States District Court for the Western District of Texas

Before POLITZ, GIBSON,^* and HIGGINBOTHAM, Circuit Judges.

JOHN R. GIBSON, Circuit Judge.

Tony Davis was convicted of one count of conspiracy, 18 U.S.C. 371 (1994), two counts of wire fraud, 18 U.S.C. 1343 (1994), two counts of travel and transportation of securities for fraudulent purposes, 18 U.S.C. 2314 (1994), and three counts of money laundering, 18 U.S.C. 1957 (1994), all in connection with his operation of an advance-fee scheme, in which he would agree to obtain funding for clients, but would never do so. Davis was sentenced to 60 months imprisonment on each of the first three counts and 97 months on each of the last five counts, to run concurrently, and assessed $3,609,937.79 in restitution. On appeal, he contends that the district court erred in failing to suppress wrongfully seized evidence, in failing to dismiss the case as a sanction for violation of Davis's attorney-client privilege, in failing to dismiss the indictment, in instructing the jury, and in sentencing him. He also argues that the evidence was insufficient to support the conspiracy and money-laundering counts. We affirm the judgment and sentence imposed.

At trial the government presented testimony of fifteen clients who came to Davis seeking venture capital for business projects. In each case the story followed the same lines. Davis would state that he had the present ability to fund such projects and that the clients would get their funding within a certain time, usually from 30 to 120 days, of paying an advance fee. Davis would promise to refund the fees if he could not provide funding. Davis would then collect fees from the clients, typically between $25,000 and $150,000. Davis never provided the funding as promised, but tantalized the clients with endless representations that their funding was just around the corner. Davis rarely refunded the fees, although he paid some money back to two clients, in one case in response to a lawsuit. From the fifteen clients who presented their stories at trial, Davis took in almost $2 million in fees.

Davis told his clients he had access to valuable financial instruments, such as a guarantee for $100 million from the Industrial Bank of Kibris, Ltd., and certificates of deposit worth $50 million from CariBank International. Davis had obtained the Kibris guarantee and other such instruments without paying anything for them. He had also received a report from an investigator he retained stating that the instruments were worthless.

Davis was assisted in his scheme by Thomas Chaffe, who provided false references to borrowers by claiming that Davis had funded a $25 million project for him. Chaffe was tried as a co-defendant on the conspiracy count and on one count of interstate travel for fraudulent purpose. He was acquitted on both counts.

Also involved was Louis Lopez, who worked in the business with Davis. Lopez posed as an escrow agent, thus enabling Davis to get an additional $300,000 out of a client who balked at sending more money to Davis himself. Lopez was not an escrow agent, and Davis appropriated the $300,000 "escrow" payment. Lopez entered a plea bargain, pleading guilty to a single misdemeanor count of filing a false income tax return.

I.

Davis argues that the district court erred in denying his motion to suppress evidence seized from his home and office in a search conducted pursuant to a search warrant. Davis objects (1) that the FBI officer who applied for the warrant omitted information from his affidavit that made the affidavit misleading to the magistrate; (2) that the warrant was not adequately particular; (3) that the warrant was overbroad; and (4) that the magistrate relied on oral statements that were not recorded.

On October 7, 1994, the FBI searched Davis's home and office under search warrants that listed fifteen categories of evidence to be seized, mostly various kinds of financial records, both paper and electronic. The warrant was based upon the affidavit of FBI agent Emil Parelli. Parelli stated that he had reason to believe the Davis house and office contained evidence of wire fraud based on his knowledge of facts about two would-be borrowers, the Goldtaper group, represented by Geoffrey Burchill and Timothy Wright, and Spacelink Airborne Systems, represented by general partner Michael Kelly.

Parelli's affidavit recounted that Wright and Burchill came to Davis, who was doing business as Forum Financial, in search of $116 million to fund two projects in Australia for the Goldtaper group. Davis told them he had sufficient securities on hand to convert to cash and fund Goldtaper's project. Burchill, Wright, and Davis signed a formal commitment letter on July 21, 1993 stating that Goldtaper would receive $15 million in funding within 120 days. Goldtaper paid Davis a $120,000 fee for providing the funding. The 120-day period expired in November 1993, but Davis did not provide the $15 million. Davis then faxed a statement to Burchill stating that Davis had $250 million in financial instruments and letters of credit; on the strength of this representation, Wright granted Davis a thirty-day extension, but Davis did not fund the project at the end of the extension. In December 1993 and January 1994, Davis told Burchill and Wright that he had borrowed the securities necessary to obtain a loan and would be able to fund Goldtaper in January 1994, but Davis never came through with the funds. Burchill made formal demand of Davis to return Goldtaper's $120,000 fee as required by the commitment letter, but Parelli's affidavit stated: "Davis did not return the fee as promised."

Parelli's affidavit also recounted the similar story of Spacelink Airborne Systems, which dealt with Davis through general partner Michael Kelly. Kelly sought $100 million in funding through Davis. Kelly and Davis signed a formal commitment letter on April 26, 1994, in which Davis promised to provide Spacelink $1 million by June 10, 1994. Kelly paid Davis $125,000 to provide this funding. Davis did not provide Spacelink any money by June 10, 1994, or by the subsequently promised dates of June 15, 1994, July 8, 1994, July 18, 1994, and July 21, 1994. Davis never funded the project. Davis provided the name of Thomas Chaffe as someone whom he had provided financing. Kelly telephoned Chaffe, who told him that he had received $25 million in funding from Davis. The next day a cooperating witness spoke to Chaffe, who told the witness that he had not received $25 million from Davis. Parelli stated that Kelly formally demanded return of his $125,000 fee, but Davis did not refund it.

The affidavit further stated that bank records revealed hundreds of thousands of dollars had come into the accounts of Davis's firm, Economic Dutch Consultants, U.S.A., Inc., doing business as Forum Financial, but that no tax returns had been filed for that company for the years 1990-1993.

Parelli presented this affidavit to the magistrate. In examining it, the magistrate asked Parelli whether there were other victims besides Goldtaper and Spacelink, and Parelli answered that there were. This colloquy was not recorded.

The magistrate issued the warrants authorizing seizure of fifteen categories of evidence, primarily financial records of Forum Financial and of Davis and his wife, Gaylan. Parelli testified that the FBI seized 65 boxes of documents in the search.

Davis moved to suppress the evidence seized in the search. After a hearing, the court denied Davis's motion.

A.

In reviewing the district court's ruling on a motion to suppress evidence, we review factual findings for clear error. See United States v. Cherna, 184 F.3d 403, 406 (5th Cir. 1999), cert. denied, 120 S. Ct. 1669 (2000). We review de novo legal conclusions regarding the constitutionality of law enforcement action, the sufficiency of the warrant, and the reasonableness of an officer's reliance on a warrant. See id. at 406-07.

In considering a Fourth Amendment challenge to a seizure conducted pursuant to a search warrant, we ask first whether the seizure falls within the good-faith exception to the exclusionary rule. See id. at 407 (citing United States v. Leon, 468 U.S. 897 (1984)). Under the good-faith exception, "evidence obtained by law enforcement officials acting in objectively reasonable good-faith reliance upon a search warrant is admissible in the prosecution's case-in-chief, even though the affidavit on which the warrant was based was insufficient to establish probable cause." United States v. Shugart, 117 F.3d 838, 843 (5th Cir. 1997) (quotation omitted). Only if we conclude that the good-faith exception does not apply do we proceed to ask whether the magistrate who issued the warrant had a substantial basis for believing there was probable cause for the search. See Cherna, 184 F.3d at 407.

(1)

Davis argues that the Leon exception does not apply to his case¹ because Parelli misled the magistrate by omitting information in his possession that would have weakened the case against him. To impeach the warrant, Davis must show that Parelli either deliberately or recklessly misled the magistrate and that without the falsehood there would not be sufficient matter in the affidavit to support the issuance of the warrant. See Franks v. Delaware, 438 U.S. 154, 171-72 (1978). The necessary falsehood can be perpetrated by omission as well as commission, but the omission must be of information that is not only relevant, but dispositive, so that if the omitted fact were included, there would not be probable cause. See United States v. Bankston, 182 F.3d 296, 305 (5th Cir. 1999), cert. granted on other grounds, 120 S. Ct. 1416 (March 20,...