US v. Ozar
| Decision Date | 01 June 1994 |
| Docket Number | No. 92-00183-02/04-CR-W-2.,92-00183-02/04-CR-W-2. |
| Parties | UNITED STATES of America, Plaintiff, v. I.I. OZAR, a/k/a Izzy Ozar, Larry J. Bridges, and Sherman W. Dreiseszun, Defendants. |
| Court | U.S. District Court — Western District of Missouri |
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R. Stan Mortenson, David R. Fontaine, Paul Enzinna, Miller, Cassidy, Larroca & Lewin, Washington, DC, for defendant Frank S. Morgan.
Terence J. Thum, Bryan Cave, Kansas City, MO, James L. Eisenbrandt, Bryan Cave, Overland Park, KS, R. Stan Mortenson, David R. Fontaine, Paul Enzinna, Miller, Cassidy, Larroca & Lewin, Washington, DC, for defendant I.I. Ozar, aka Izzy Ozar.
Thomas J. Bath, Jr., Bryan Cave, Overland Park, KS, Charles W. German, Rouse, Hendricks, German, May & Shank, P.C., Kansas City, MO, for defendant Larry J. Bridges.
R. Stan Mortenson, David R. Fontaine, Paul Enzinna, Miller, Cassidy, Larroca & Lewin, Washington, DC, Robert J. Campbell, Lewis, Rice & Fingersh, Kansas City, MO, for defendant Sherman W. Dreiseszun.
Matt J. Whitworth, Marietta Parker, U.S. Attys. Office, Kansas City, MO, for plaintiff U.S.
Pending before this Court is the defendants' joint motion to suppress, filed June 22, 1993. Defendants seek to suppress the fruits of an electronic surveillance conducted by the Federal Bureau of Investigation (FBI) during the investigation of this case. The defendants have asserted that the suppression should be granted because: (1) there was no probable cause to support the authorization of the surveillance; (2) there was no necessity for the use of the electronic surveillance; and (3) the United States failed to properly minimize the electronic surveillance it did undertake.
On February 8, 1994, Chief United States Magistrate John T. Maughmer filed a 96 page report and recommendation to this Court. Judge Maughmer's recommendation was based upon an extensive evidentiary hearing which lasted approximately three weeks. The conclusion that he reached and recommended to this Court is that the defendants' joint motion to suppress be granted. On March 8, 1994, the United States filed its objections to the report and recommendation. The government's response totaled 195 pages. Thereafter, On April 8, 1994, the defendants filed their joint response to the United States' objection. Their response totaled 153 pages.
This Court has reviewed these filings which total approximately 443 pages plus supportive documentation, and after much thought has decided to grant the joint motion to suppress. In doing so, this Court adopts the report and recommendation of the Magistrate. The proposed findings of fact and conclusions of law are adopted as this Court's findings of fact and conclusions of law. There is no useful purpose served in this Court filing a separate findings of fact and conclusions of law.
By granting this joint motion to suppress, this Court does not pass judgment on FBI electronic surveillance in general. This Court merely addresses the problems associated with those relating to this case. Those problems are numerous and are reflected in the report and recommendation.
Wherefore, it is ordered that defendants' joint motion to suppress is granted.
On October 18, 1992, the grand jury returned a ten-count indictment charging Defendants Frank Morgan,1 I.I. Ozar, Sherman W. Dreiseszun and Larry J. Bridges with conspiring to defraud the United States in the bidding process for government leases in violation of 18 U.S.C. §§ 371, 1031 and 1001. Presently pending before this Court is defendants' motion to suppress the fruits of the electronic surveillance conducted by the Federal Bureau of Investigation ("FBI") during the investigation of this case. In arguing for suppression, defendants allege that: 1) there was no probable cause to support the authorization of the surveillance; 2) there was no necessity for the use of electronic surveillance; and 3) the United States failed to properly minimize the electronic surveillance it did undertake.
In order to fully consider the issues presented by the defendants, this Court conducted an extensive evidentiary hearing over a period of 21 days, listening to the testimony of over 25 witnesses and admitting over 280 exhibits into evidence. On the basis of that hearing, the record, and the arguments of counsel, this Court submits the following proposed Findings of Fact and Conclusions of Law2 and accordingly recommends that the District Court enter an order granting defendants' motion to suppress evidence.
1. On June 5, 1991, a federal district court granted the government's request to conduct audio and video surveillance of Defendant Morgan, Defendant Ozar, Defendant Bridges, Defendant Dreiseszun, David Feingold "and others as yet unknown" during Saturday morning business meetings being conducted at the offices of M-D Management, Inc. An Affidavit of a Special Agent of the Federal Bureau of Investigation ("the June 5 Affidavit") accompanied the application for electronic surveillance and provided the only information presented to the district court in support of the government's request.
2. M-D Management was a management company owned and controlled by Morgan and Dreiseszun. Both Morgan and Dreiseszun had offices at M-D Management and conducted many of their business activities there. In particular, Morgan and Dreiseszun regularly held Saturday morning meetings at M-D Management's offices with Bridges, Feingold and a host of other business associates.
3. Initially, electronic surveillance at M-D Management was only authorized during these Saturday morning business meetings. This limited surveillance was conducted on Saturdays from June 8, 1991 through August 20, 1991. However, after August 20, 1991, daily electronic surveillance at M-D Management was authorized by the district court. Ultimately, on September 27, 1991, the court further extended the surveillance to include a wiretap on the telephones at M-D Management.3 Electronic surveillance at M-D Management ended on December 12, 1991.
4. Morgan and Dreiseszun were business partners involved in a wide variety of business enterprises in the Kansas City area, including banking, commercial real estate development and shopping centers. Suffice it to say that their financial presence and control permeated the Kansas City business community.
5. Ozar was a long time business associate of Morgan and Dreiseszun, and owned interests, along with Morgan and Dreiseszun, in several partnerships.
6. Feingold was Morgan's son-in-law, the president of Metro North State Bank ("Metro North") and also owned interests in several partnerships with Morgan, Dreiseszun, and Ozar.
7. Other key business associates included Bridges, a real estate developer in the Kansas City area, and his former business partner, Ted Ehney. Bridges and Ehney originally jointly owned Executive Hills, Inc. ("Executive Hills") and were responsible for developing many commercial real estate projects in the Kansas City area, at times in conjunction with Morgan, Ozar and/or Dreiseszun. GX 4 at 40.4 In December of 1988, Bridges and Ehney formally split their business interests with Ehney assuming sole ownership of Executive Hills North, Inc. ("Executive Hills North"), and Bridges assuming sole ownership of Executive Hills. Executive Hills and Executive Hills North received substantial financing from Metro North and Home Savings Association ("Home Savings").
8. Among the many business interests held by Morgan, Ozar and Dreiseszun were Home Savings and Metro North. Morgan, Ozar and Dreiseszun also sat on the Board of Directors for these institutions.
9. The June 5 Affidavit relied on information from four sources: an Office of Thrift Supervision ("OTS") criminal referral, an OTS examiner, Lloyd Steven Grissom and Randy Nay.
(i) OTS Criminal Referral — After conducting a routine audit of Home Savings, the OTS filed a criminal referral with the FBI regarding loan transactions between Home Savings, Bridges, Ehney and their companies. This criminal referral provided the basis for some information contained in the June 5 Affidavit.
(ii) OTS Examiner — The OTS examiner for Home Savings who participated in the examination of Home Savings that occurred during the ten months prior to the March, 1991 seizure of Home Savings by federal regulators also provided information that was included in the June 5 Affidavit. Tr. 841.5
(iii) Lloyd Steven Grissom — Lloyd Steven Grissom, a business associate of Ehney and the accountant and comptroller of Executive Hills North from 1986 to 1989, approached the FBI in late 1989 and offered to cooperate with the government in its investigation of Ehney and Executive Hills North in exchange for immunity in that case. Tr. 40, 984, Tr. 9/18/93 Vol. II 48-49. In cooperating with the Executive Hills North investigation, Grissom provided substantial information concerning the illegal activities of Ehney. Tr. 985-86.
(iv) Randy Nay — Randy Nay held various positions at Home Savings, ranging from Vice President to Vice Chairman, during his fifteen year tenure with the savings and loan association. Nay departed from Home Savings in December of 1989. Tr. 9/7/93 66-67.
10. The June 5 Affidavit relied on several activities involving Morgan, Ozar, Dreiseszun, and Bridges as bases for probable cause to believe that criminal activity was occurring or being discussed at M-D Management during the Saturday morning meetings. These activities can be broken down into two critical groups — historical activity6 and ongoing activity.
11. Those respective groups of activities were based on information on several subjects obtained from various sources as reflected below:
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