United States v. Levy

• Decision Date: 25 February 2013
• Docket Number: S5 11 Cr. 62 (PAC)
• Parties: UNITED STATES OF AMERICA, Plaintiff, v. DONNA LEVY and DAVID LEVY, Defendants.
• Court: U.S. District Court — Southern District of New York

UNITED STATES OF AMERICA, Plaintiff,

v.DONNA LEVY and DAVID LEVY, Defendants.

S5 11 Cr. 62 (PAC)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

Dated: February 25, 2013

OPINION AND ORDER

HONORABLE PAUL A. CROTTY, United States District Judge:

Donna Levy ("Mrs. Levy") and David Levy ("Mr. Levy," collectively the "Levys" or "Defendants") move to suppress evidence seized during an October 5, 2010 search of their residence pursuant to a warrant that Defendants contend was unconstitutionally overbroad and did not satisfy the Fourth Amendment's particularity requirement. Mr. Levy also moves to suppress documents taken from him and photocopied by United States Customs agents during a December 17, 2011 search of Mr. Levy upon his return to the United States from Panama. In addition, Mr. and Mrs. Levy each move for a bill of particulars relating to certain of the allegations and charges against them, respectively, contained in the most recent Superseding Indictment.¹

For the following reasons, Defendants' motions are DENIED.²

BACKGROUND

A. Procedural History

Under the multiple-count Superseding Indictment dated June 28, 2012 (the "Indictment," ECF No. 188), Defendants are charged with securities fraud, wire fraud, conspiracy to commit securities and wire fraud, and money laundering. On November 16, 2012, this Court denied Defendants' motion to suppress evidence of intercepted communications (and any evidence derived therefrom) from three wiretaps authorized by the United States District Court for the District of New Jersey, pursuant to Title III of the Omnibus Crime Control and Safe Streets Act of 1968, 18 U.S.C. §§ 2510-22 ("Title III"), and for a hearing pursuant to Franks v. Delaware, 438 U.S. 154 (1978). See United States v. Levy, No. S5 11 Cr. 62, 2012 WL 5830631. (ECF No. 217.)

B. The October 4, 2010 Warrant Application and Search Warrant and the October 5, 2010 Search of the Levys' Residence

On October 4, 2010, at 5:48 p.m., United States Magistrate Judge Robin S. Rosenbaum of the United States District Court for the Southern District of Florida approved a search and seizure warrant (the "Search Warrant") for the Levys' residence, based on an application and affidavit of the same date of Special Agent Joseph Cerar of Immigration and Customs Enforcement (the "Cerar Aff.," Kramer Affir. Ex. A). The Search Warrant was executed at 6:00 a.m. the following morning.

1. The Warrant Application and Cerar Affidavit

Special Agent Cerar began his affidavit by detailing his training and law enforcement experience. (Cerar Aff. ¶ 1.) Special Agent Cerar stated that there was probable cause that evidence of violations of 18 U.S.C. § 1343 (wire fraud) and § 1349 (conspiracy to commit wire fraud) would be found at the Levys' residence, and that there was probable cause to believe thatMrs. Levy³ and other individuals and entities "are involved in an extensive 'pump and dump' fraud scheme . . . [that] has involved dozens of targeted stocks over at least a five-year period." (Id. ¶¶ 2-3.) The bases of this determination came from Special Agent Cerar's training and experience, and his participation in the investigation, which included Title III wiretaps, financial and trading records, materials posted on various blogs, websites, and the social media networks Twitter and Facebook, and interviews of a confidential source. (Id. ¶ 4.)

Special Agent Cerar described a scheme whereby Mrs. Levy and other individuals would manipulate and artificially inflate the market value of certain stocks by, inter alia, coordinating the public dissemination of misleading information about the companies and the increased trading in the companies' stocks, then "dumping" their holdings after other investors were deceived into buying such stock at the manipulated valuations. (Id. ¶¶ 5-6.) Special Agent Cerar identified a website and related email list that Mrs. Levy allegedly ran, and which she used to perpetrate the pump and dump scheme. (Id. ¶¶ 7-8.) Special Agent Cerar recounted debriefing the confidential source who stated that he had been to the Levys' residence several times to discuss the pump and dump scheme with Mrs. Levy, and that he had seen Mrs. Levy in her residence handle documents and access electronic records related to the scheme. (Id. ¶ 8.)

Special Agent Cerar asserted that information derived from the wiretaps also established probable cause to believe that Mrs. Levy used her residence to engage in discussions about, and to execute, the pump and dump scheme with regards to the stock of one company, identified as "Stock 3." (Id. ¶¶ 10-14.) Special Agent Cerar stated that the information obtained from the wiretap regarding the manipulation of Stock 3 by Mrs. Levy and others coincided with sharply increased trading in Stock 3 consistent with a pump and dump scheme, and with informationabout Stock 3 being disseminated by a Twitter account and an email account associated with the co-conspirators and Mrs. Levy. (Id. ¶¶ 15-16.)

Special Agent Cerar also set forth the types of materials that he believed persons engaged in the pump and dump activities Mrs. Levy was accused of participating in would have at their homes, and stated that he believed such materials would be found in the Levys' residence and requested permission to seize these items. (Id. ¶¶ 19-25.) Special Agent Cerar specifically described the probable cause for the search and seizure of computers and other electronic devices used in the pump and dump scheme. (Id. ¶¶ 20, 22-24.)

2. The Search Warrant

The Search Warrant identified the Levys' residence as the property to be searched, and stated that it was believed to conceal "[e]vidence, [f]ruits, and [i]nstrumentalities of criminal violations of Title 18, United States Code, Sections 1343 and 1349, as further described in 'Attachment B.'" Attachment B substantially mirrored Paragraph 19 of the Cerar Affidavit and described the property to be seized as:

Evidence, fruits, and instrumentalities of violations of Title 18, United States Code, Sections 1343 (Wire Fraud), 1349 (Conspiracy to Commit Wire Fraud), and 1956 and 1957 (Money Laundering), including the following:

a. Financial statements, trade confirmations and bank records concerning trades of stocks and other financial instruments;

b. Company descriptions, reports, prospectuses, SEC or other regulatory filings, correspondence, stock certificates, and other records and documentation concerning stocks and other financial instruments;

c. Books, records, receipts, notes, ledgers, and other documents reflecting financial transactions, analyses and/or movement of funds;

d. Telecommunication access devices such as pre-paid calling cards, cell phones, and fax machines;e. Address books, Rolodexes, diaries, spreadsheets, calendars, identification documents, photographs, video, and audio recordings, and other documents reflecting information concerning the identities of potential co-conspirators and any potential victims of these offenses;

f. Records concerning ownership and use of telephones, email accounts, websites, accounts on and lists of subscribers to social media sites such as Twitter, telephone message pads, correspondence, notes, memoranda, air bills and shipping records, and photographs, audio and video recordings of potential co-conspirators and any potential victims of these offenses;

g. Information, including titles, incorporation documents, receipts, correspondence, photographs and other records concerning ownership of the PREMISES, of other funds and financial accounts, of assets, and of assets such as bank and trading accounts or stocks that may be or have been used to facilitate the above offenses;

h. Cash, stock certificates, jewelry, and similar assets representing potential proceeds of the schemes;

i. Computers and computer equipment, including desktop and laptop computers, mobile computing devices such as smartphones and iPhones, disks and disk drives, peripheral devices capable of storing information such as printers, scanners, etc., and electronic data storage devices such as hard drives, CD-ROMs, thumb drives, flash media, and other similar devices, including all passwords, software, equipment and related manuals used to encrypt data stored on these devices, and any and all charging equipment or software, plus the manuals or instructions relating to such software as is used by the electronic devices or media previously specified in this attachment.

The Search Warrant did not include a date range limitation for the materials to be seized, nor did it limit the scope of the seizure to materials related to "Stock 3" (or reference or identify Stock 3). The Search Warrant also did not attach or incorporate the Cerar Affidavit or describe the underlying conduct as constituting a pump and dump scheme.

Law enforcement officers executed the Search Warrant on October 5, 2010 and seized two hand guns, two computers, two cellphones, and assorted documents.

C. The December 17, 2011 Border Search of Mr. Levy

On the evening of December 17, 2011, upon his arrival at Miami International Airport on a flight from Panama, Mr. Levy was detained by U.S. Customs agents. (Aff. of David Levy ¶ 3, Kramer Affir. Ex. B ("David Levy Aff.").) Mr. Levy asserts that the agents did not question him or inform him why he was being detained, but removed him to a holding area in the airport while they took and searched his possessions, including a notebook of his, which the agents viewed and photocopied. (Id. ¶¶ 3-4.) Mr. Levy states that he was held for approximately two hours, that he was not asked any questions, and that "[e]ventually they gave me back my belongings and told me I could leave." (Id. ¶ 3.)

On December 20, 2011, less than three days after the border search, Mr. Levy was charged under Indictment S3 11 Cr. 62 (PAC) (ECF No. 134) for, inter alia, engaging in a multi-year pump and dump stock fraud conspiracy with Mrs. Levy in start-up companies, and a warrant was issued for his arrest.

...