U.S. v. Phillips

• Decision Date: 24 November 2009
• Docket Number: No. 07-4230.,07-4230.
• Citation: 588 F.3d 218
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Mark E. PHILLIPS, a/k/a Mark Aaron, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

588 F.3d 218

UNITED STATES of America, Plaintiff-Appellee, v. Mark E. PHILLIPS, a/k/a Mark Aaron, Defendant-Appellant.

No. 07-4230.

United States Court of Appeals, Fourth Circuit.

Argued: September 25, 2009.

Decided: November 24, 2009.

ARGUED:

James Wyda, Federal Public Defender, Baltimore, Maryland, for Appellant. Joyce Kallam McDonald, Office of the United States Attorney, Baltimore, Maryland, for Appellee.

ON BRIEF:

Denise C. Barrett, Assistant Federal Public Defender, Office of the Federal Public Defender, Baltimore, Maryland, for Appellant. Rod J. Rosenstein, United States Attorney, Baltimore, Maryland, for Appellee.

Before WILKINSON and DUNCAN, Circuit Judges, and DAMON J. KEITH, Senior Circuit Judge of the United States Court of Appeals for the Sixth Circuit, sitting by designation.

Affirmed by published opinion. Judge WILKINSON wrote the opinion, in which Judge DUNCAN and Senior Judge KEITH joined.

OPINION

WILKINSON, Circuit Judge:

Appellant Mark Phillips was convicted, after a jury trial in the District of Maryland, of securities fraud, mail fraud, wire fraud, and access device fraud. He now appeals his conviction, arguing that the district court erred under the Fourth Amendment in denying his motion to suppress evidence seized pursuant to a search warrant. According to Phillips, the agents executing the search warrant exceeded the warrant's scope by seizing items not expressly named therein.

After careful consideration, we reject Phillips's claim. We hold that the warrant's inclusive language was reasonably read by the agents to encompass the seized evidence and that the agents' seizures were therefore permissible. Accordingly, we affirm the judgment.

I.

A.

In early 2003, the United States Postal Inspection Service began a fraud investigation of appellant Mark Phillips. The investigation revealed that over a period of approximately three years, Phillips had fraudulently applied for several credit cards, using his father's identity and declaring a false income. Phillips then used those fraudulent credit cards to make expensive purchases. Among other items, Phillips bought several pieces of stereo, exercise, and computer equipment, collectible coins, a pool table, a telescope, and a samurai sword. Ultimately, Phillips accumulated hundreds of thousands of dollars of credit card bills and either did not attempt to pay those bills or attempted to pay with bad checks.

Investigators at the U.S. Postal Inspection Service also uncovered other fraud perpetrated by Phillips. For example, Phillips possessed two driver's licenses, each with his own photograph, address, and date of birth, but each with a different name: Mark Le Roy Aaron and Mark Edwards Phillips. Additionally, investigators learned that Phillips had opened an account for frequent gamblers at an Atlantic City casino using his father's social security number and had made over $28,000 in cash withdrawals on that account. A criminal search history revealed that Phillips had previously been arrested on state charges of theft by deception and issuing bad checks.

During the course of the investigation, postal inspection agents also became aware that Phillips was the "CEO and Founder" of a business called Phydea, which provided online financial stock reports. Some of Phillips's fraudulent purchases helped to fund Phydea. For example he used a fraudulent credit card to pay Interland Web Hosting for the hosting and maintenance of his business's website, Phydea.com, and he used a fraudulent card to purchase advertisements for Phydea, which appeared in Investor's Business Daily. Also, Phillips frequently used Phydea's corporate name in connection with his credit card fraud. For instance, Phillips bought entertainment equipment with a fraudulent VISA card using the internet address Phydea.com; Phillips made a purchase on eBay using the e-mail address phydea@earthlink.com; Phillips fraudulently applied for an American Express card using the e-mail address CEO@ PHYDEA.com; and when applying for the same American Express card, Phillips misstated his income as $1 million and misstated Phydea's annual revenue as $10 million. Unbeknownst to the postal inspectors at the time, however, Phillips was using Phydea in connection with more than just credit card fraud; he was also using it and a related investment vehicle, Phydea Equity Fund, as part of an elaborate securities fraud scheme.

In July 2003, the U.S. Postal Inspection Service sought a search warrant for Phillips's Maryland residence. The magistrate judge approved the search warrant, finding probable cause for violations of access device fraud (18 U.S.C. § 1029), fraud in connection with identification documents (18 U.S.C. § 1028), and bank fraud (18 U.S.C. § 1344).

The search warrant and incorporated affidavit authorized the seizure of a wide range of items and documents. Specifically, Part I of Attachment A described items and services purchased using fraudulent credit cards. It contained a number of specific examples, "including but not limited to" "[p]ayments to Interland Web Hosting for the hosting of a webpage titled PHYDEA.com." Part II of Attachment A listed "[i]tems that relate to or constitute evidence, fruits, or instrumentalities of violations of 18 U.S.C. §§§ 1028, 1029 or 1344, as described in the Affidavit." Like Part I, Part II listed numerous examples "including but not limited to" the following relevant categories:

Category A: Mail, books, records, receipts, notes, ledgers and other papers ... relating to fraudulent conduct and financial crimes, including but not limited to those documents and records relating to payments to Interland Web Hosting for the hosting of a webpage titled PHYDEA.com.

Category C: Books, records, receipts, bank statements and bank records ... relating to fraudulent conduct and financial crimes.

Category D: Checks, pass books, bank checks and any other items evidencing the obtaining, secreting, transfer, concealment and/or expenditure of money.

Category J: [C]redit cards, in any form and credit card account numbers, payment device and/or account numbers of any kind.

The affidavit also set forth additional details relating to Phillips's case and the evidence of his fraud.

Prior to executing the search warrant, Inspector Judy Starliper, the head of the investigation, thoroughly briefed all agents on the facts of Phillips's case. Her operations plan summarized the investigation and informed the agents that Phillips "has a webpage called PHYDEA.com and uses the same e-mail address to make his purchases." Each agent was provided a copy of Attachment A listing the items to be seized. During this briefing, another agent, Inspector David Reardon, informed the team that he had received a complaint from an aggrieved investor in Phydea Equity Fund, an entity related to Phydea, and therefore requested that the agents alert him if they saw anything relating to Phydea or Phydea Equity Fund during the search.

Immediately following the briefing, the U.S. Postal Inspection Service team executed the search warrant. During the search, Inspector Reardon himself identified several documents relating to Phydea and Phydea Equity Fund. He noted that these documents contained personal identifying information "which was in many regards what Inspector Starliper was looking for in an identity fraud situation" and potentially related to many of the fraudulent credit card purchases made using Phydea's name. To err on the side of caution, Inspector Reardon brought the documents to the attention of his superiors, and Inspector Starliper telephoned the United States Attorney's office to seek guidance on whether the Phydea and Phydea Equity Fund documents were seizable. After reading the warrant and accompanying affidavit, the Assistant United States Attorney concluded that the warrant authorized their seizure.

In executing the warrant, the agents seized a number of documents and records that not only helped confirm the investigators' suspicions of credit card fraud but also revealed to the investigators for the first time the full extent of Phillips's securities law violations involving Phydea and Phydea Equity Fund. Among these seized documents and records are several categories of evidence that Phillips now contests: documents and records relating to Phydea, including invoices for the Phydea advertisements appearing in Investor's Business Daily; documents and records relating to Phydea Equity Fund, including the files of individual investors; and some of Phillips's own financial records, including his bank statements.

B.

In April 2005, the United States charged Phillips with thirty-five counts of securities fraud (15 U.S.C. § 78j(b)), mail fraud (18 U.S.C. § 1314), wire fraud (18 U.S.C. § 1343), and access device fraud (18 U.S.C. § 1029(a)(2)). A federal grand jury indicted Phillips on all counts. Prior to trial, Phillips filed a motion to suppress the evidence seized pursuant to the search warrant. He argued that the contested seizures fell outside the scope of the warrant, because the warrant did not explicitly mention those items.

Following a four-day evidentiary hearing, in which the district court heard testimony from a number of witnesses, the district court denied Phillips's motion to suppress. In reaching its decision, the district court made the following findings. First, it found that the seizure of Phydea-related documents was proper, because those documents were seized "in connection with the credit card investigation." In so finding, the court noted that Phillips had used several fraudulent credit cards to make purchases in connection with Phydea and that Phillips had misstated Phydea's income on a fraudulent credit card application. Second, the district court held that the agents were justified in seizing documentation relating to Phydea Equity Fund, because at the time of the search, it was unnecessary to draw fine distinctions between the two entities of...