U.S. v. Scarfo

• Decision Date: 26 December 2001
• Docket Number: Criminal Action No. 00-404 (NHP).
• Citation: 180 F.Supp.2d 572
• Parties: UNITED STATES, v. Nicodemo S. SCARFO, et al.
• Court: U.S. District Court — District of New Jersey

180 F.Supp.2d 572

UNITED STATES, v. Nicodemo S. SCARFO, et al.

Criminal Action No. 00-404 (NHP).

United States District Court, D. New Jersey.

December 26, 2001.

COPYRIGHT MATERIAL OMITTED

Vincent C. Scoca, Bloomfield, NJ, Norris E. Gelman, Philadelphia, PA, for Nicodemo S. Scarfo.

Richard M. Roberts, West Orange, NJ, for Frank Paolercio.

Ronald D. Wigler, Assistant United States Attorney, Robert J. Cleary, United States Attorney, Newark, NJ, for United States.

THE ORIGINAL OF THIS LETTER OPINION AND ORDER IS ON FILE WITH THE CLERK OF THE COURT

POLITAN, District Judge.

Dear Counsel:

This matter comes before the Court on Defendant Nicodemo S. Scarfo's ("Scarfo") pretrial motion for discovery and suppression of evidence. The Court heard oral argument on July 30, 2001 and again on September 7, 2001. Co-defendant Frank Paolercio ("Paolercio") joined in the motion. The government thereafter moved to invoke the Classified Information Procedures Act. For the following reasons, the Defendants' motion for discovery is granted in part and denied in part, and the motion to suppress evidence is denied.

BACKGROUND

This case presents an interesting issue of first impression dealing with the ever-present tension between individual privacy and liberty rights and law enforcement's use of new and advanced technology to vigorously investigate criminal activity. It appears that no district court in the country has addressed a similar issue. Of course, the matter takes on added importance in light of recent events and potential national security implications.

The Court shall briefly recite the facts and procedural history of the case. Acting pursuant to federal search warrants, the F.B.I. on January 15, 1999, entered Scarfo and Paolercio's business office, Merchant Services of Essex County, to search for evidence of an illegal gambling and loansharking operation. During their search of Merchant Services, the F.B.I. came across a personal computer and attempted to access its various files. They were unable to gain entry to an encrypted file named "Factors."

Suspecting the "Factors" file contained evidence of an illegal gambling and loansharking operation, the F.B.I. returned to the location and, pursuant to two search warrants, installed what is known as a "Key Logger System" ("KLS") on the computer and/or computer keyboard in order to decipher the passphrase to the encrypted file, thereby gaining entry to the file. The KLS records the keystrokes an individual enters on a personal computer's keyboard. The government utilized the KLS in order to "catch" Scarfo's passphrases to the encrypted file while he was entering them onto his keyboard. Scarfo's personal computer features a modem for communication over telephone lines and he possesses an America Online account. The F.B.I. obtained the passphrase to the "Factors" file and retrieved what is alleged to be incriminating evidence.

On June 21, 2000, a federal grand jury returned a three-count indictment against the Defendants charging them with gambling and loansharking. The Defendant Scarfo then filed his motion for discovery and to suppress the evidence recovered from his computer. After oral argument was heard on July 30, 2001, the Court ordered additional briefing by the parties. In an August 7, 2001, Letter Opinion and Order, this Court expressed serious concerns over whether the government violated the wiretap statute in utilizing the KLS on Scarfo's computer. Specifically, the Court expressed concern over whether the KLS may have operated during periods when Scarfo (or any other user of his personal computer) was communicating via modem over telephone lines, thereby unlawfully intercepting wire communications without having applied for a wiretap pursuant to Title III, 18 U.S.C. § 2510.

As a result of these concerns, on August 7, 2001, this Court ordered the United States to file with the Court a report explaining fully how the KLS device functions and describing the KLS technology and how it works vis-à-vis the computer modem, Internet communications, e-mail and all other uses of a computer. In light of the government's grave concern over the national security implications such a revelation might raise, the Court permitted the United States to submit any additional evidence which would provide particular and specific reasons how and why disclosure of the KLS would jeopardize both ongoing and future domestic criminal investigations and national security interests.

The United States responded by filing a request for modification of this Court's August 7, 2001, Letter Opinion and Order so as to comply with the procedures set forth in the Classified Information Procedures Act, Title 18, United States Code, Appendix III, § 1 et seq. ("CIPA"). This request, of course, presented a new wrinkle into what had been an already intriguing case. Defendant Scarfo objected to the government's request, alleging that the United States did not make a sufficient showing that the information concerning the KLS had been properly classified.

In response to Scarfo's objection, the United States submitted the affidavit of Neil J. Gallagher, Assistant Director, Federal Bureau of Investigation, dated September 6, 2001. In his affidavit, Mr. Gallagher stated that the characteristics and/or functional components of the KLS were previously classified and marked "SECRET" at or around November 1997.

The Court heard oral argument on September 7, 2001, to explore whether the government may invoke CIPA and, specifically, whether the government had classified the KLS. Although the defense conceded that the KLS was classified for purposes of CIPA,¹ the Court reserved on that question and ordered the government to provide written submissions to the Court. The government then filed an ex parte, in camera motion for the Court's inspection of the classified material.

On September 26, 2001, the Court held an in camera, ex parte hearing with several high-ranking officials from the United States Attorney General's office and the F.B.I. Because of the sensitive nature of the material presented, all CIPA regulations were followed and only those persons with top-secret clearance were permitted to attend. Pursuant to CIPA's regulations, the United States presented the Court with detailed and top-secret, classified information regarding the KLS, including how it operates in connection with a modem. The government also demonstrated to the Court how the KLS affects national security.

After reviewing the classified material, I issued a Protective Order pursuant CIPA on October 2, 2001, wherein I found that the government could properly invoke CIPA and that the government made a sufficient showing to warrant the issuance of an order protecting against disclosure of the classified information. The October 2, 2001, Protective Order also directed that the government's proposed unclassified summary of information relating to the KLS under Section 4 of CIPA would be sufficient to allow the defense to effectively argue the motion to suppress. Accordingly, the Protective Order permitted the government to provide Scarfo with the unclassified summary statement in lieu of the classified information regarding the KLS. Pursuant to Section 6(d) of CIPA, the Court also sealed the transcript of the September 26th ex parte, in camera hearing and the government's supporting Affidavits. The government filed with the Court and served on Scarfo the unclassified summary on October 5, 2001, in the form of an October 4, 2001, Affidavit of Randall S. Murch, Supervisory Special Agent of the Federal Bureau of Investigation, Laboratory Division (the "Murch Affidavit").

Having the benefit of the September 26th ex parte, in camera hearing and the many supplemental submissions of the parties, the Defendants' motion for discovery and suppression is now ripe for resolution.

DISCUSSION

Defendants Scarfo and Paolercio advance several arguments in moving to suppress certain evidence seized by the FBI. The Defendants first contend that the KLS constituted an unlawful general warrant in violation of the Fourth Amendment to the Constitution. In addition, the Defendants, after reviewing the government's unclassified summary, i.e., the Murch Affidavit, argue that the Murch Affidavit is inadequate under CIPA and would conflict with the United States Supreme Court decision of Jencks v. United States, 353 U.S. 657, 77 S.Ct. 1007, 1 L.Ed.2d 1103 (1957). Lastly, Defendants urge the Court to suppress the evidence because the KLS effectively intercepted a wire communication in violation of Title III, 18 U.S.C. § 2510.

I. General Warrant

Scarfo argues that since the government had the ability to capture and record only those keystrokes relevant to the "passphrase" to the encrypted file, and because it received an unnecessary overcollection of data, the warrants were written and executed as general warrants. This claim is without merit.

Typically, the proponent of a motion to suppress bears the burden of establishing that his Fourth Amendment rights were violated. See United States v. Acosta, 965 F.2d 1248, 1257 n. 9 (3d Cir.1992) (citing Rakas v. Illinois, 439 U.S. 128, 130 n. 1, 99 S.Ct. 421, 58 L.Ed.2d 387 (1979)). The standard of proof in this regard is a preponderance of the evidence. See United States v. Matlock, 415 U.S. 164, 178 n. 14, 94 S.Ct. 988, 39 L.Ed.2d 242 (1974) ("[T]he controlling burden of proof at suppression hearings should impose no greater burden than proof by a preponderance of the evidence.").

It is settled that at a hearing on a motion to suppress, "the credibility of the witnesses and the weight to be given the evidence, together with the inferences, deductions and conclusions to be drawn from the evidence, are all matters to be determined by the trial judge." United States v. McKneely, 6 F.3d 1447, 1452-53 (10th Cir.1993). See also United States v. Matthews, 32 F.3d 294, 298 (7th Cir.1994); United States v....