US v. A RESIDENCE LOCATED AT 218 3RD STREET, 84-M-191

• Decision Date: 26 November 1985
• Docket Number: 84-M-193.,No. 84-M-191,84-M-191
• Parties: UNITED STATES of America, Plaintiff, v. A RESIDENCE LOCATED AT 218 3RD STREET, NEW GLARUS, WISCONSIN, Defendant, and UNITED STATES of America, v. ONE SAFETY DEPOSIT BOX LOCATED AT the BANK OF SHOREWOOD HILLS, 810 SHOREWOOD BLVD., MADISON, WISCONSIN, Defendant.
• Court: U.S. District Court — Western District of Wisconsin

622 F. Supp. 908

UNITED STATES of America, Plaintiff, v. A RESIDENCE LOCATED AT 218 3RD STREET, NEW GLARUS, WISCONSIN, Defendant, and UNITED STATES of America, v. ONE SAFETY DEPOSIT BOX LOCATED AT the BANK OF SHOREWOOD HILLS, 810 SHOREWOOD BLVD., MADISON, WISCONSIN, Defendant.

Nos. 84-M-191, 84-M-193.

United States District Court, W.D. Wisconsin.

November 26, 1985.

Grant Johnson, First Asst. U.S. Atty., Madison, Wis., for plaintiff.

Charles Giesen, Giesen & Berman, Madison, Wis., for defendant.

OPINION AND ORDER

CRABB, Chief Judge.

The government appeals from orders of the United States Magistrate entered in these two proceedings requiring the return of certain seized property to its owner, movant David Lewallen.

The record reveals that on November 13, 1984, the United States Magistrate issued a search warrant authorizing a search of "a single-family, ranch style residence and an unattached shed type structure, all located at 218 Third Street, New Glarus, Wisconsin," and seizure of enumerated kinds of records evidencing either the obtaining and concealment of assets or the expenditures of money by David Lewallen since 1978; indicia of ownership of the property being searched; and photographs of co-conspirators, assets, or controlled substances, particularly cocaine. Supporting the application for the warrant were lengthy affidavits sworn to by Tommy Cauthen, Special Agent, Federal Bureau of Investigation, and by George Paul, Special Agent, Criminal Investigation Division of the Internal Revenue Service, detailing a four year investigation of David Lewallen and setting forth the bases for the affiants' beliefs that movant had violated 21 U.S.C. §§ 841, 843, 844, and 846, as well as 26 U.S.C. §§ 7201, 7203, and 7206.¹ Affiants swore to instances in which Lewallen was alleged to have sold large quantities of cocaine or to have acquired expensive assets that would suggest he had not reported all of his taxable income for the years 1977-1983. Also, Agent Paul averred as follows:

7. That on Tuesday, 11/06/84, I contacted the Criminal Investigation Branch of the Internal Revenue Service Center at Kansas City, Missouri. At that time I caused a search to be made of the Internal Revenue Service Records located at the Midwest Service Center in order to determine whether or not David R. Lewallen had filed a Federal Income Tax Return for the tax year 1983. On 11/06/84 I received confirmation from the Midwest Service Center that David R. Lewallen had not filed an income tax return for the year 1983. The Service Center records reflect that Lewallen has filed three requests for extension of time to file his 1983 Federal Income Tax Return. The records of the IRS-Midwest Service Center also reflected that Lewallen's income tax return for the tax year 1983 was due to be filed by October 15, 1984 and, based upon the search conducted by Internal Revenue Service employees in Kansas City that return was not filed by October 15, 1984 as required and has not yet been filed.

Following issuance of the warrant, agents of the Federal Bureau of Investigation seized items from the New Glarus residence which they listed in a fifteen page inventory filed with the magistrate.

On November 14, 1984, the magistrate issued a second warrant, authorizing the search of "One safety deposit box No. 1083, located at The Bank of Shorewood Hills, 810 Shorewood Boulevard, Madison, Wisconsin." Supporting the application for this warrant were the same affidavits of Paul and Cauthen filed in support of the New Glarus warrant, supplemented by an affidavit of Dale G. Mueller, Supervisory Special Agent, Federal Bureau of Investigation, detailing information he asserted established probable cause to believe that the safe deposit box contained evidence of criminal activity by its owner, David Lewallen.

Search of the safe deposit box led to seizure of approximately eighteen items, including six large emeralds and several containers of gold coins.

On November 27, 1984, David Lewallen moved for return of the property seized in the execution of the search warrant for the New Glarus property, contending that he was entitled to lawful possession of some of it, that he needed certain papers returned to him to permit him to conduct his personal and business affairs, that the warrant authorizing the search had been issued without probable cause, that the warrant did not describe with sufficient particularity the items to be seized, and that the seizure of some of the items exceeded the authority of the warrant. Later, Lewallen amended the motion to include a request for the return of items seized in the search of the safe deposit box. On January 28, 1985, Lewallen moved for an evidentiary hearing, contending that the affidavit of Agent Paul contained material false statements and deliberate material omissions made by the affiant with either knowledge of their falsity or reckless disregard for their truth, Franks v. Delaware, 438 U.S. 154, 98 S.Ct. 2674, 57 L.Ed.2d 667 (1978), and also that the seizure of the bank records relating to movant violated 12 U.S.C. § 3401 et seq., the Right to Financial Privacy Act.

On April 29, 1985, over the government's strenuous objections, the magistrate held an evidentiary hearing on Lewallen's motion.² In an order entered April 16, 1985, granting the motion for an evidentiary hearing, the magistrate noted that the government had conceded that paragraph 7 of Paul's affidavit was inaccurate and that, in fact, Lewallen had filed his 1983 tax return before its October 15, 1984 due date. The magistrate held that when paragraph 7 is excised from the affidavit, "there appears to be insufficient evidence to support a finding of probable cause to believe there was a violation of the laws with respect to the 1983 tax year." (Order of April 16, 1985, p. 4)

On the basis of the evidence adduced at the evidentiary hearing, the magistrate concluded as a matter of law that Paul's statement in paragraph 7 had been made with reckless disregard for the truth. He found also that the materials seized in the execution of the warrant for the safe deposit box were taken in violation of § 3420 of the Right to Financial Privacy Act, 12 U.S.C. § 3401 et seq. He ordered the return of those seized materials relating to the 1983 tax year or obtained from the search of the safety deposit box.

As a threshold matter, the government argues that the magistrate should have characterized his order as a report and recommendation pursuant to subsection (b)(1)(C) of 28 U.S.C. § 636, rather than as an order. I agree.

The Federal Magistrates Act, 28 U.S.C. §§ 631-639, sets forth the jurisdiction and powers of magistrates. Magistrates have all the powers and duties imposed upon their predecessors, United States Commissioners, § 636(a)(1); the power to conduct trials of misdemeanors, § 636(a)(3); the power, upon designation by a judge, to hear and determine "any pretrial matter pending before the court," with certain enumerated exceptions, one of which is a motion to suppress evidence, § 636(b)(1)(A); the authority to conduct evidentiary hearings and submit to a judge proposed findings of fact and recommendations for disposition, of any motions excepted in § 636(b)(1)(A), and of applications for post-trial relief brought by convicted persons and of prisoner petitions challenging conditions of confinement, § 636(b)(1)(B). Also, magistrates may be designated as special masters, § 636(b)(2); may conduct any or all proceedings in a jury or nonjury civil matter upon consent of the parties, § 636(c); and "may be assigned such additional duties as are not inconsistent with the Constitution and laws of the United States," § 636(b)(3).

The two subsections that might apply to this proceeding are § 636(b)(1) (pretrial matters) and § 636(b)(3) (additional duties). However, a motion for return of seized property is not a "pretrial matter" within the meaning of § 636(b)(1); by its very nature, such a motion is made after seizures that do not lead directly to indictment and trial. Once an indictment is returned, the person aggrieved by the seizure would file a motion to suppress the seized evidence.

Disposition of a motion for the return of seized property is not a mere procedural or administrative function that would fall within the confines of § 636(c); its resolution frequently requires factfinding, credibility assessment, and the exercise of discretion, all of which are functions that Congress has retained in district judges. See United States v. Curry, 767 F.2d 328 (7th Cir.1985); In re Grand Jury Appearance of William C. Cummings, 615 F.Supp. 68 (W.D.Wis.1985). Thus, since motions for the return of property do not fit precisely into either § 636(b)(1) or § 636(b)(3), it could be argued that a magistrate lacks the statutory authority even to hear and make recommendations for the disposition of such motions. However, it is unlikely that Congress would have given magistrates the power to conduct evidentiary hearings and submit proposed findings of fact on motions to suppress illegally seized evidence, but would not have given magistrates the authority to hear and make recommendations on motions to return seized property, when the motions are essentially identical. I conclude that magistrates are empowered by implication to conduct evidentiary hearings and to submit proposed findings of fact and recommendations on motions for the return of seized property.

I will construe the magistrate's order as a report and recommendation and determine whether to accept or reject his findings, giving de novo consideration to those portions of the report to which the government has made specific objections. 28 U.S.C. § 636(b)(1). The first of these portions is the magistrate's proposed finding of fact that Agent Paul acted with reckless disregard for the truth in making the statement in paragraph 7 of his affidavit. See Franks v. Delaware, 438 U.S. 154, 98 S.Ct. 2674. Preliminary to...