United States v. Ganias
| Decision Date | 24 June 2011 |
| Docket Number | CASE NO. 3:08CR00224(AWT) |
| Court | U.S. District Court — District of Connecticut |
| Parties | UNITED STATES OF AMERICA v. STAVROS M. GANIAS |
Defendant Stavros Ganias ("Ganias") filed a motion to suppress evidence. For the reasons set forth below, the motion was denied.
In approximately September 1998, Industrial Property Management ("IPM"), a company owned by co-defendant James McCarthy ("McCarthy"), was awarded a contract to provide security for and to maintain the government-owned property at 500 Main Street, Stratford, Connecticut, formerly the Stratford Army Engine Plant ("SAEP"). The United States Army ceased operations at the plant in approximately 1998, and it engaged IPM to maintain the facility and provide security for the property pending transfer of the property to the City of Stratford.
The contract awarded to IPM was initially on a "cost-plus" basis; the Army would reimburse the contractor for all of its expenses and pay in addition a negotiated fee. However, at some point after September 2002, when the contract was re-bid and IPM lost the contract, but before November 17, 2003, the contract wasconverted into a fixed-price contract as a result of a lawsuit filed by IPM against the government in the United States Court of Federal Claims.
In approximately August 2003, Special Agent Michael Conner ("Conner") of the U.S. Army Criminal Investigation Division ("Army CID") received word that an anonymous telephone caller ("CS-1") had made allegations regarding misconduct or potential misconduct at the SAEP. In September 2003, Conner and Special Agent James Cary of the Defense Criminal Investigative Service (who had received the initial call) met with CS-1. Conner met with CS-1 on ten to 15 occasions over the next several months.
During his conversations with Conner, CS-1 made a number of allegations of misconduct at SAEP. First, he provided information regarding the theft of Army property from the facility. Second, he alleged that during the period in which IPM had the cost-plus contract with the Army, IPM employees had performed work for American Boiler, Inc. ("AB"), another of McCarthy's companies. Although AB did not have a contract with the Army, the work had been billed to the Army. Third, he alleged that the environmental subcontractor for SAEP was a company owned by IPM's operations manager, Richard Meier, and McCarthy's daughter, Megan McCarthy. Fourth, CS-1 alleged that IPM had been presented to the Army as a woman-owned business, owned by McCarthy's wife Lyn McCarthy, but that he had rarely seen Lyn McCarthy at the facility and the company was operated byMcCarthy on a day-to-day basis. Fifth, CS-1 alleged that Richard Meier had used personnel employed by IPM to do construction work at his residence during their regular workday, while billing the labor to the Army.
Conner investigated this information in a number of ways, including checking the companies' filings with the Connecticut Secretary of the State's office and records at the Connecticut Department of Labor. CS-1 told him that IPM and AB's books were kept by Ganias, doing business as Taxes International. Connor drove by the addresses that CS-1 gave him for the offices of AB and Taxes International, respectively, and verified that the companies were located at those addresses. Conner also met with a former employee of IPM, CS-2. CS-2 provided information similar to that provided by CS-1. CS-2 also provided evidence that suggested that James McCarthy had been signing documents requiring the signature of Lyn McCarthy, including contracts with the Army.
On November 17, 2003, Conner received authorization from a magistrate judge for three search warrants: (1) for the SAEP, 550 Main Street, Stratford, Connecticut; (2) for the offices of Taxes International, 170 North Plains Industrial Road, Wallingford, Connecticut; and (3) for AB's offices, 214 Benton Street, Stratford, Connecticut. These search warrants were executed on November 19, 2003.
The warrants authorized the seizure from all three locationsof computer hardware, software, and computer-related data relating to the business, financial, and accounting operations of IPM and AB. Because Conner sought, and was authorized to seize, computer data, he obtained the assistance of Army CID's Computer Crimes Investigative Unit ("CCIU"), a section of his agency with specialized expertise in forensics and computer imaging. Special Agents David Shaver ("Shaver"), Jennie Callahan ("Callahan"), and Harold Van Duesen of the CCIU (collectively the "CCIU Agents") assisted with the execution of the warrants. On November 19, 2003, these three agents seized the computer data on 11 computers from the three locations, including three computers from Ganias's office. Ganias was present at the time of the search and spoke to the agents.
The data on these 11 computers was copied onto blank external hard-drives brought by the agents, making "mirror images" of the hard drives of the computers, at the locations that were searched.1 The CCIU Agents chose to make mirror imagesbecause they believed that it could have taken months to do a file-by-file search of the computers. Had the CCIU Agents seized the computers themselves, as they were authorized to do under the warrant, it would have prevented the people at IPM, Taxes International, and AB from using their computers for the entire time the agents were conducting their search. A full search would have taken months to complete for several reasons. First, the processing time of computers was slow enough in 2003 that a search through the full hard drive of a computer would have been time-consuming, and a search of multiple computers even more so. Second, it would also have taken a significant amount of time to search the computers because using forensic software to review documents created with proprietary software, such as QuickBooks and TurboTax, is especially difficult, and requires copies of the correct versions of the programs, which the agents did not have. Third, the search had to be conducted with care because data could have been hidden or disguised through encryption of thedata or by simply renaming a file to have a different extension.2
The following day, November 20, 2003, the 11 mirror images were compressed onto a single hard drive, which was provided to Conner, who maintained it as evidence. The external hard drives the CCIU Agents had used in making the mirror images during the search were retained by Shaver after the search. Approximately eight days after the search, Shaver provided Conner with two 19-DVD sets made from those external hard drives; each set contained mirror images of the 11 computers. After making the two sets of DVDs, Shaver "purged" the external hard drives, erasing all data from them.3 One of the DVD sets was maintained as evidence and the other was used as a working copy.
On February 5, 2004, Conner prepared a request and sent one set of 19 DVDs, along with the request, to the U.S. Army Criminal Investigation Laboratory, along with a copy of one of the search warrants. The Criminal Investigation Laboratory's duty was to review the computer data for information that was generallypertinent to the investigation, make that information available to the case agent, and segregate the remainder of the information. Gregory Norman ("Norman"), a digital evidence examiner employed by the Army Criminal Investigation Laboratory, was assigned to conduct the review in early June 2004.
While reviewing the paper documents seized during the November 2003 search, Army CID agents found evidence of payments made by IPM to a company called Industrial Management Services ("IMS"), which was owned by an individual named William DeLorenze ("DeLorenze"). Although IPM invoiced IMS in 1998, IMS was not registered with the Connecticut Secretary of the State until 1999, notwithstanding the fact that such registration is required of military contractors and subcontractors. In addition, the Connecticut Department of Labor provided the agents with information reflecting that DeLorenze was a full-time employee of Travelers Insurance and was not receiving wages or salary from any other entity.4 As a result, in March 2004, Conner contacted IRS Criminal Investigation. On March 26, the IRS attended a briefing at the United States Attorney's office. On the same day, Special Agent Michelle Chowaniec ("Chowaniec") replaced Conner as the primary case agent for Army CID. In early May 2004, the IRS was officially authorized to join theinvestigation. At that time, the case was assigned to Special Agent Paul Holowczyk ("Holowczyk") of the IRS, and in September 2004, Special Agent Amy Hosney ("Hosney") began working on the case as the case agent.
On May 20, 2004, the set of 19 DVDs that had not been sent to the Army Criminal Investigation Laboratory was provided by Chowaniec to Holowczyk. The same day, Holowczyk turned them over to Special Agent George Francischelli ("Francischelli"), the IRS computer specialist assigned to the case, who maintained them as evidence until June 30, when he transmitted the DVDs to Special Agent Vita Paukstelis ("Paukstelis"), another computer investigative specialist for the IRS. Francischelli also provided Paukstelis with a copy of the search warrant for Taxes International, including the list of items to be seized and the affidavit submitted with the search warrant application, and a note listing companies, addresses, and key individuals relating to the investigation. On the note was a handwritten notation next to the name "Taxes International" that stated "(return preparer) do not search."
Meanwhile, in the first week of June 2004, Chowaniec asked Holowczyk about whether the IRS had begun a forensic examination of the computer data, and also had a conversation with the Army lab about whether it had begun its examination of the computer data. Neither had. The IRS examination was...
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