United States v. Esformes, Case No. 16-20549-Cr-Scola/Otazo-Reyes

CourtUnited States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Southern District of Florida
PartiesUnited States of America Plaintiff, v. Philip Esformes, et al., Defendants.
Docket NumberCase No. 16-20549-Cr-Scola/Otazo-Reyes
Decision Date13 November 2018

United States of America Plaintiff,
Philip Esformes, et al., Defendants.

Case No. 16-20549-Cr-Scola/Otazo-Reyes

United States District Court Southern District Of Florida

November 13, 2018

Order on Government's Objections (ECF No. 931) and Defendant's Objections (ECF No. 933) to Report and Recommendation (ECF No. 899)

This matter is before the Court on the Government's objections (ECF No. 931) and Defendant Philip Esformes's objections (ECF No. 933) to the Report and Recommendation (ECF No. 899) (hereafter, "Report") entered by Magistrate Judge Otazo-Reyes on August 10, 2018. The Court referred Esformes's Motion to Disqualify the Prosecution Team for Systematic Violations of the Attorney-Client, Work Product and Joint Defense Privileges (hereafter, "Motion to Disqualify") (ECF No. 275) and Motion to Dismiss Indictment, in Whole or in Part, Suppress Evidence and/or Sever Counts 32 & 33 and Exclude the Obstruction Evidence (hereafter, "Motion to Dismiss") (ECF No. 278) to Magistrate Judge Otazo-Reyes. Judge Otazo-Reyes held nine days of evidentiary hearings in October, November and December 2017. Judge Otazo-Reyes also held oral arguments in March 2018 prior to entering her Report.1

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This Court has carefully read all of the transcripts of the evidentiary hearings held by Magistrate Judge Otazo-Reyes and the Report, which contains over 80 pages of factual findings. The Court has also reviewed the written submissions of the parties and relevant legal authorities. The Court held oral arguments on the objections to the Report on November 8, 2018.

I. Judge Otazo-Reyes's Recommendations

In the Report, Magistrate Judge Otazo-Reyes recommends that the Court deny the Motion to Disqualify and the Motion to Dismiss. However, she also makes certain findings of improper government conduct and expresses credibility concerns about some prosecution testimony. As a result of those findings, she recommends exclusion of some evidence and testimony in the case. In particular, she recommends that the Court suppress: (1) any documents from the Eden Gardens search that are found to be privileged after Esformes's privilege log is litigated; (2) the "Descalzo documents," including the "Bengio notes" and the Excel/Quickbooks spreadsheets; (3) the text messages between Norman Ginsparg and Esformes related to Esformes's divorce that were listed by the Government as trial exhibits; and, (4) the recordings by the Delgado brothers and any testimony by them regarding the contents of those recordings.

Magistrate Judge Otazo-Reyes also ruled that the Defendant failed to meet the requirements for establishing misjoinder and obtaining the severance of Count 34 of the Third Superseding Indictment, which charges Defendant with obstruction of justice by funding Guillermo ("Willy") Delgado's flight from the United States to avoid trial in his own case.

II. Objections

The Government and Esformes filed objections to the magistrate judge's Report. On October 30, 2018, the parties submitted responses to those objections.

A. The Government's Objections

In its objections, the Government claims the magistrate judge erred in four ways:

1. By recommending exclusion of the "Delgado recordings" and related evidence;

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2. By recommending exclusion of documents relating to Jacob Bengio;

3. By recommending exclusion of certain text messages involving Esformes; and

4. By making findings regarding the Government's "improper conduct" including, but not limited to, finding that the Government disregarded the attorney-client and work-product privileges, attempted to obfuscate the evidentiary record, and provided facially inconsistent and an incredible explanation for its handling of "the Bengio documents."

The Government claims the exclusion of the Delgado recordings and related evidence is unsupported by the law and the facts. The Government further strongly disputes the findings of improper conduct and claims it always acted in good faith throughout its investigation. It claims that those findings are unsupported by the record and that this Court should reject those findings as unnecessary given the Report's conclusion that Esformes has not shown sufficient prejudice from any of the alleged violations. The Government also states that it does not intend to introduce either the Bengio documents or the text messages in its case-in-chief, thus making those recommendations unnecessary and Esformes's request to suppress those materials moot.

B. Esformes's Objections

Esformes does not take issue with any of the magistrate judge's factual findings. However, Esformes objects to the remedies recommended by the magistrate judge, which he claims did not go far enough. Esformes argues that the Government's three-years-long pattern of misconduct and its repeated violations of the attorney-client privilege were so pervasive and so prejudicial that dismissal of the Third Superseding Indictment is warranted. In the alternative, Esformes seeks an order disqualifying the prosecution team from the case and excluding the Delgado brothers as witnesses in the case. Esformes did not object to the magistrate's ruling denying his request to sever Count 34.

III. Standard of Review

The Court reviews objections to a magistrate judge's report and recommendation de novo. See United States v. Farias-Gonzalez, 556 F. 3d 1181, 1184 n.1 (11th Cir. 2009). To the extent a party fails to object to parts of the magistrate judge's report, those portions are reviewed for clear error. See Macort v. Prem, Inc., 208 F. App'x 781, 784 (11th Cir. 2006).

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"When a district court refers a matter to a magistrate judge to conduct an evidentiary hearing and make findings of fact, the district court is required to make a de novo determination" as to the portions of the magistrate judge's report that the parties have objected to. Amlong & Amlong, P.A. v. Denny's, Inc., 500 F.3d 1230, 1245 (11th Cir. 2007) (discussing 28 U.S.C. § 636(b)(1)); see also United States v. Raddatz, 447 U.S. 667, 674 (1980) (explaining that 28 U.S.C. § 636(b) "calls for a de novo determination, not a de novo hearing"). "In making its determination, the district court is generally free to employ the magistrate judge's findings to the extent that it sees fit—the court may adopt the magistrate judge's findings in whole, in part, or not at all." Amlong & Amlong, 500 F.3d at 1245. But "a district court may not reject a magistrate judge's factual and credibility findings" unless it holds a new hearing to observe the demeanor of the witnesses. Id.; see also Raddatz, 447 U.S. at 671-72 (accepting a magistrate judge's unadorned conclusion that he found one witness "more credible" than another). The rationale for this rule is simple: "Credibility determinations are typically the province of the fact finder because the fact finder personally observes the testimony and is thus in a better position than a reviewing court to assess the credibility of witnesses." United States v. Ramirez-Chilel, 289 F.3d 744, 749 (11th Cir. 2002).

The Eleventh Circuit has stated, "this general rule is subject to a small exception in the 'rare case' where 'there . . . [is] found in the transcript an articulable basis for rejecting the magistrate's original resolution of credibility and that basis . . .[is] articulated by the district judge.'" United States v. Cofield, 272 F.3d 1303, 1306 (11th Cir. 2001) (citing United States v. Marshall, 609 F.2d 152, 155 (5th Cir. 1980)). A reviewing court must generally defer to the magistrate judge's credibility determinations unless those determinations appear to be "unbelievable." Ramirez-Chilel, 289 F.3d at 749.

IV. Legal Standards

Judge Otazo-Reyes properly summarized the appropriate legal standards that a district court must apply when considering whether to dismiss an indictment or disqualify a prosecution team. As Judge Otazo-Reyes explained, Esformes bears the burden of showing misconduct on the part of the government and prejudice to him. And, even if Defendant satisfies this burden, a less drastic remedy, such as suppression, must be considered.

"Federal courts possess the power and duty to dismiss federal indictments obtained in violation of the Constitution or laws of the United States." United States v. Pabian, 704 F.2d 1533, 1536 (11th Cir. 1983). However, "dismissal of an indictment for prosecutorial misconduct is an

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'extreme sanction which should be infrequently utilized.'" Id. (quoting United States v. Owen, 580 F.2d 365, 367 (9th Cir. 1978)).

To obtain dismissal of an indictment on a claim of government intrusion into the attorney-client relationship, the Defendant must establish that the government misconduct caused prejudice to him. See United States v. Ofshe, 817 F.2d 1508, 1515 (11th Cir. 1987); United States v. DeLuca, 663 F. App'x 875, 878-79 (11th Cir. 2016). Pursuant to Supreme Court precedent, dismissal is "plainly inappropriate" as a remedy for a Sixth Amendment violation if there is no "demonstrable prejudice." Id. at 1515 (citing United States v. Morrison, 449 U.S. 361, 364 (1981)). The same has been held by the Supreme Court to be true where a Fifth Amendment violation has occurred, and the same seems to holds true for any Fourth Amendment violation as well. See Morrison, 499 U.S. at 364; see also Ofshe, 817 F.2d at 1516 (holding that defendant was not entitled to dismissal of indictment in part because the defendant had suffered no prejudice when the government used a defendant's criminal defense attorney as an informant against him). Similarly, although a district court may exercise its supervisory powers to dismiss an indictment in response to inappropriate government conduct, the moving party must still show prejudice. See Bank of Nova Scotia v. United States, 487 U.S. 250, 255 (1988) (stating, in the context of non-constitutional grand jury errors, that "a district court exceeds its powers in dismissing an indictment for prosecutorial misconduct not prejudicial to the...

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