Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_07-cv-00452/USCOURTS-caed-2_07-cv-00452-4/pdf.json

Nature of Suit Code: 690
Nature of Suit: Other Forfeiture and Penalty Suits
Cause of Action: 28:1345 Complaint for Forfeiture

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

UNITED STATES OF AMERICA;

NO. CIV. 07-452 FCD KJM

Plaintiff,

v. MEMORANDUM AND ORDER

APPROXIMATELY $15,630.00 IN

U.S. CURRENCY, APPROXIMATELY

$8,000.00 IN U.S. CURRENCY,

APPROXIMATELY $12,639.97 IN

MONEY ORDERS, APPROXIMATELY

$60,517.00 IN U.S. CURRENCY,

APPROXIMATELY $14,271.OO IN

U.S. CURRENCY, APPROXIMATELY

$90,000.00 IN U.S. CURRENCY,

APPROXIMATELY $1,820.50 IN

MONEY ORDERS, AND

MISCELLANEOUS SMOKELESS

TOBACCO PRODUCTS,

Defendants.

----oo0oo----

 This matter is before the court on claimants’ Jawid Wahidi

(“Wahidi”) and LMS International, Inc. (“LMS”) (collectively,

“claimants”) motion to suppress evidence seized from Wahidi’s

residence at 215 West Seventh, Los Angeles, California, pursuant

to a search warrant issued by United States Magistrate Judge

Jennifer T. Lum. Claimants contend that the search of Wahidi’s 

Case 2:07-cv-00452-FCD-KJM Document 45 Filed 09/07/07 Page 1 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1 Because oral argument will not be of material

assistance, the court orders this matter submitted on the briefs. 

E.D. Cal. Local Rule 78-230(h).

2

residence violated the Fourth Amendment to the United States

Constitution in that the search warrant was not supported by

probable cause to believe that evidence of alleged tax violations

would be found at Wahidi’s residence. Plaintiff, United States

of America (“plaintiff”), opposes claimants’ motion. For the

reasons set forth below, the court DENIES claimants’ motion.1

BACKGROUND

On October 12, 2006, United States Magistrate Judge Lum

issued a search warrant for the search of nineteen businesses and

residences, including claimant Wahidi’s residence and claimant

LMS’s place of business. (Pl.’s Compl., filed March 7, 2007, Ex.

A.) Trista K. Frederick, Special Agent of the Bureau of Alcohol,

Tobacco, Firearms, and Explosives, applied for the warrant on a

written affidavit. (Pl.’s Compl. ¶¶ 5-6.) The affidavit alleged

that claimants were involved in an illegal scheme to defraud the

State of California of excise taxes due from the sale of tobacco

products called “other tobacco products” (“OTP”), which includes

smokeless tobacco and cigars. (Aff., attached as Ex. A to Pl.’s

Compl., ¶¶ 88-97.) 

The alleged fraudulent scheme centered around untaxed

purchases and sales of OTP. (Id. ¶¶ 5-8.) Persons violate

federal laws if they are licensed by the State of California to

engage in the purchase and sale of tobacco products and they fail

to comply with California laws regarding accounting, tax, and

payment requirements. (Id. ¶ 5.) Unlicensed persons or licensed

Case 2:07-cv-00452-FCD-KJM Document 45 Filed 09/07/07 Page 2 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2 Investigator Beckwith has been investigating tax fraud

for over ten years. He has had extensive training in several

relevant tax fraud investigation techniques and has participated

in more than 10 search warrants obtained by BOE or other law

enforcement agencies. (Aff. ¶ 2.)

3

persons not complying with California’s accounting, tax, and

payment laws may not possess specified quantities of smokeless

tobacco under federal law, and smokeless tobacco in the

possession of such persons is contraband. (Id.)

Agent Frederick conducted the investigation leading up to

the application for the search warrant in conjunction with

Investigator Clayton Beckwith of the California Board of

Equalization (“BOE”).2 Agents from the Arizona Department of

Revenue, the Federal Bureau of Investigations, and the Phoenix

Police Department were also involved in the investigation. (Aff.

¶ 3.) The investigation uncovered a large-scale scheme to

distribute untaxed OTP received in Arizona and shipped to

California for the purpose of avoiding state excise taxes. (Aff.

¶ 6.) BOE estimates that this scheme cost the State of

California over $30,000,000 in tax revenue between January 2004

to July 2005. Id. The affidavit also relates that most of the

receivers of untaxed OTP, including claimants, are licensed by

BOE but not in compliance with California’s accounting, tax, and

payment requirements relating to their licenses because, among

other things, (1) they have failed to report or under-reported

purchases and distributions of untaxed OTP; (2) do not have

proper invoices for OTP: and (3) have not paid the required

excise taxes on OTP. Therefore, their receipt, possession, and

///

Case 2:07-cv-00452-FCD-KJM Document 45 Filed 09/07/07 Page 3 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3 18 U.S.C. § 2342(a) provides that “It shall be unlawful

for any person knowingly to ship, transport, receive, possess,

sell, distribute, or purchase contraband cigarettes or contraband

smokeless tobacco.” 18 U.S.C. § 2341(7) defines “contraband

smokeless tobacco” as a quantity in excess of 500 single unit

consumer-sized containers or packages of smokeless tobacco that

are in possession of any person other than a person licensed by

the State and who has complied with the State’s accounting, tax,

and payment requirements.

4

 distribution and sale of OTP violates 18 U.S.C. § 2342.3 (Aff.

¶ 7.)

The investigation also revealed that claimant LMS is owned

by claimant Wahidi, and at the time Agent Frederick applied for

the search warrant, LMS had a sales tax permit and wholesaler’s

and distributor’s licenses for OTP. (Aff. ¶ 88.) Aside from

being listed on customer lists of untaxed OTP suppliers and cell

phone records of calls between LMS and untaxed OTP suppliers,

(Aff. ¶¶ 49, 88, 91, 92), the affidavit states that analysis of

LMS bank records and tax returns suggested that LMS purchased

untaxed OTP and failed to properly report the purchases and the

resulting taxable distributions. BOE claims that LMS under

reported taxable purchases by $122,943 in July and September of

2004. (Aff. ¶ 89.) The affidavit discloses several other

instances of LMS’s under-reporting and failure to report untaxed

OTP purchases and taxable distributions. (See Aff. ¶¶ 88-97.) 

Thus, plaintiff concludes that LMS’s possession of OTP on the

date of the search warrant was a violation of 18 U.S.C. § 2342. 

(Aff. ¶ 97.)

The affidavit also includes statements by Investigator

Beckwith and BOE Investigator Tim Raboy to Agent Frederick

regarding their firsthand experiences with search warrants of

Case 2:07-cv-00452-FCD-KJM Document 45 Filed 09/07/07 Page 4 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4 Approximately six of Investigator Beckwith’s searches

related to OTP cases and the other four related to tax evasion. 

Of the six OTP related searches, 70% of the business records

located in the residences related directly to OTP, 15-20% related

to the operation of the OTP business, and 15-20% were other

business records. (Aff. ¶ 167.) 

5

residences. (Aff. ¶ 167.) Investigator Beckwith told Agent

Frederick that based on his experience, OTP and evidence of the

possession and distribution of OTP, essentially business records,

are commonly found in an individual’s place of business and at

the individual’s residence. Investigator Beckwith also believes

that licensees often take their business records home to avoid

discovery at the business location. During each of Investigator

Beckwith’s approximately 10 searches of private residences, he

discovered business records relating to the alleged crimes in the

respective affidavits.4

 BOE Investigator Tim Raboy related to

Special Agent Frederick that in each of the twelve OTP related

searches of residences he has been involved in, 60-70% of the

business records obtained in the residences related directly to

OTP, 15-20% related to the operation of the OTP business, and 15-

20% were other business records. (Aff. ¶ 167.)

Based upon these facts, the search warrant authorized agents

to search for evidence and contraband related to the alleged

fraudulent scheme, including income tax records, excise tax

records, specific business records, banking records, real estate

and vehicle records, computers, currency, and other specific

records at LMS’s place of business and Wahidi’s residence. (See

Aff. Attachment B.) During the execution of the warrant,

officers found $8,000 in cash, which the government is seeking to

forfeit; a sales invoice for tobacco and a check to LMS for

Case 2:07-cv-00452-FCD-KJM Document 45 Filed 09/07/07 Page 5 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

$3,087; written invoices not in compliance with California law;

packing lists for tobacco products shipped and sold to a business

in Nevada; untaxed tobacco products purchased in Nevada; several

types of OTP; two safe deposit box keys; and an IRS notice of an

appointment to verify compliance with the reporting requirement

involving cash payments exceeding $10,000. (Pl.’s Opp’n ¶ II.

A.) 

STANDARD

When reviewing the validity of a search warrant, the court

must “ensure that the magistrate had a ‘substantial basis for . .

. conclud[ing]’ that probable cause existed.” Illinois v. Gates,

462 U.S. 213, 237-39 (1983) (quoting Jones v. United States, 362

U.S. 257, 271 (1960)); United States v. Stanert, 762 F.2d 775,

779 (9th Cir. 1985). Moreover, a magistrate is charged with

making a “practical, common-sense decision whether, given all the

circumstances set forth in the affidavit before him, including

the “veracity” and “basis of knowledge” of persons supplying

hearsay information, there is a fair probability that contraband

or evidence of a crime will be found in a particular place.” 

Stanert, 762 F.2d at 778-79 (citing Gates, 462 U.S. at 238). A

reviewing court may not reverse a magistrate’s conclusion unless

it is “clearly erroneous.” United States v. Estrada, 773 F.2d

683, 684 (9th Cir. 1984). “A deferential standard of review is

appropriate to further the Fourth Amendment’s strong preference

for searches conducted pursuant to a warrant.” Massachusetts v.

Upton, 466 U.S. 727, 733 (1984).

///

///

Case 2:07-cv-00452-FCD-KJM Document 45 Filed 09/07/07 Page 6 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

ANALYSIS

Claimants contend that the search of Wahidi’s residence

violated the Fourth Amendment because the search warrant was not

supported by probable cause to believe that evidence of tax

violations would be found in Wahidi’s residence. Claimants also

contend that the affidavit does not provide evidence of a

connection between the alleged tax violations committed by

claimants and Wahidi’s residence. Plaintiff responds that, in

light of all the circumstances, probable cause existed to believe

that evidence of the alleged tax violations would be found inside

Wahidi’s residence and that the affidavit showed evidence of a

connection between the alleged violations and Wahidi’s residence.

A. Probable Cause Existed to Search Wahidi’s Residence

The affidavit demonstrated a “fair probability” that

contraband or evidence of the alleged tax violations would be

found at Wahidi’s residence. See Gates, 462 U.S. at 238. The

affidavit described the nature and scope of the alleged criminal

scheme in detail and included statements from Investigator

Beckwith explaining that in 100% of the approximately ten

residential searches he has conducted, business records have been

found. (Aff. ¶ 167.) Specifically as to OTP related residential

searches, Investigator Beckwith reported that “60-70% of the

business records located in the residences related directly to

OTP, 15-20% related to the operation of the OTP business and 15-

20% were other business records.” Id. Also, Investigator

Raboy’s statements that of his OTP related searches, 60-70% of

the business records located in the residence were directly

related to OTP supports a conclusion that OTP-related evidence

Case 2:07-cv-00452-FCD-KJM Document 45 Filed 09/07/07 Page 7 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8

would be found in Wahidi’s residence. See id. Therefore, a

magistrate judge could reasonably conclude that there was a

significant probability that contraband or evidence of the

alleged tax violations would be found in Wahidi’s residence.

The Ninth Circuit has held that similar representations by

government agents established probable cause to believe that

business records would likely be found in a target’s residence. 

See United States v. Sayakhom, 186 F.3d 928, 934 (9th Cir. 1999). 

In Sayakhom, the court upheld a search warrant where the affiant

stated that operators of businesses that involve paperwork

“typically maintain and carry business records into and out of

their offices, in their cars and to and from their residences.” 

Id. Thus, a fair reading of the affidavit and Ninth Circuit

precedent support a finding that probable existed to search

Wahidi’s residence.

B. The Affiant’s Reliance on the Training, Experience, and

Observations of Fellow Officers is Warranted

Claimants object to the affidavit’s use of other law

enforcement officers’ “hearsay” statements based on the officers’

experience and expertise. It is well established that “a

magistrate may consider hearsay statements in an affidavit in

determining whether there is probable cause. . . .” United

States v. Castillo, 866 F.2d 1071, 1077 (9th Cir. 1983) (citing

Gates, 462 U.S. at 238); United States v. Guerrero, 756 F.2d

1342, 1348-49 (9th Cir. 1984) (a magistrate can consider hearsay

statements in an application for a search warrant if there is a

substantial basis for crediting the hearsay), cert. denied, 469

U.S. 934 (1984). Moreover, “observations of fellow officers of

Case 2:07-cv-00452-FCD-KJM Document 45 Filed 09/07/07 Page 8 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9

the government engaged in a common investigation are plainly a

reliable basis for a warrant applied for by one of their number.” 

United States v. Ventresca, 380 U.S. 102, 111 (1965); see also

United States v. Spears, 965 F.2d 262, 277 (7th Cir. 1992)

(holding that a magistrate could regard an affiant’s fellow law

enforcement officers as reliable sources). 

Not only were Investigators Beckwith and Raboy engaged in a

common investigation concerning Wahidi, but both investigators

have significant training and experience, including actually

discovering business records during the execution of

approximately twenty-two search warrants at residences in similar

cases. (Aff. ¶ 167.) For this reason, claimants’ reliance on

United States v. Schultz, 14 F.3d 1093 (6th Cir. 1994) is

misplaced. In Schultz, the court held that a search warrant was

not supported by probable cause because the affiant surmised that

evidence would be found in a safe deposit box without support for

his belief other than his training and experience. Id. at 1097-

1098. The court held, “Officer Ideker did not have anything more

than a guess that contraband or evidence of a crime would be

found in the boxes, and therefore the first warrant should not

have been issued.” Id. Unlike Schultz, Investigators Beckwith

and Raboy draw on their extensive experience and the actual

results from their numerous residential searches involving OTP

and tax evasion investigations. Thus, the basis of this search

warrant differs from the search warrant in Schultz in

particularity and substance.

Further, the warrant does not rest solely on the

investigators’ statements, but also contains numerous other facts

Case 2:07-cv-00452-FCD-KJM Document 45 Filed 09/07/07 Page 9 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

10

that when taken together with the investigators’ statements

demonstrate the reasonableness of the magistrate judge’s

conclusions, including the extensive investigation conducted by

law enforcement officers. (Aff. ¶¶ 88-95.) For example, the

affidavit contains information pertaining to surveillance at

Wahidi’s business, LMS; tax returns submitted by LMS which appear

to under-report taxable OTP purchases; and telephone records. 

Id. These facts combined with Investigator Beckwith’s and

Raboy’s frequent discovery of evidence of similar crimes at

residences provide a reasonable basis upon which the magistrate

judge could rely when issuing the warrant. 

C. Even If No Probable Cause Existed to Search Wahidi’s

Residence, the Good Faith Exception is Applicable

The good faith exception to the exclusionary rule applies

when law enforcement officers reasonably rely on a search warrant

issued by a detached and neutral magistrate judge that is later

found invalid. United States v. Leon, 468 U.S. 897,919-20

(1984); See also United States v. Hendricks, 743 F.2d 653, 656

(9th Cir. 1984) (declining to apply the exclusionary rule though

the warrant supporting a search was held invalid because the

officer’s reliance on the warrant was not unreasonable). Here,

there is no evidence that the issuing magistrate judge abandoned

her detached and neutral role, or that Agent Frederick was

dishonest or reckless in preparing her affidavit. Therefore,

even if the warrant lacked probable cause, the officers

reasonably relied on the warrant in a good faith execution of

their duties.

Case 2:07-cv-00452-FCD-KJM Document 45 Filed 09/07/07 Page 10 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

11

Claimants erroneously cite Schultz to support their

proposition that the good faith exception should not apply in

this case. While Schultz held that the warrant in question

lacked probable cause, the court upheld the search under the good

faith exception. The court found that the nexus between the

alleged crime and the location to be searched was close enough

that a reasonable officer could rely on the warrant. Schultz, 14

F.3d at 1098. Similarly, Agent Frederick had probable cause to

believe that claimants committed several crimes related to

untaxed OTP and when combined with Investigator Beckwith’s and

Raboy’s discoveries of evidence and contraband in similar

searches, Agent Frederick had a reasonable basis for relying on

the search warrant.

Claimants also suggest that the good faith exception is

inapplicable where the affiant relies only on hearsay. In

support of this proposition, claimants cite United States v.

Weaver; however, plaintiff correctly points out that Weaver

expressly states, to the contrary, that hearsay can be used to

establish probable cause. 99 F.3d 1372, 1377 (6th Cir. 1998). 

The evidence in Weaver was suppressed because the “only claim of

possible wrongdoing” contained in the affidavit came from an

informant who stated that three days earlier he was inside a

residence and saw marijuana “expressly for the purpose of

unlawful distribution.” Id. at 1378. The affiant included no

additional facts to support his beliefs, no information

pertaining to an independent investigation by the affiant, nor

any information pertaining to the informant’s reliability in the

past. Id. at 1379. Conversely, the affidavit in this case

Case 2:07-cv-00452-FCD-KJM Document 45 Filed 09/07/07 Page 11 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

12

includes significant, detailed information regarding the

extensive investigation undertaken by experienced law enforcement

officers into claimants’ alleged criminal activity. Moreover,

none of the information supplied to establish probable cause in

this case came from an informant.

Lastly, claimants rely on United States v. Weber, 923 F.2d

1338 (9th Cir. 1991). The affidavit in Weber relied on

information that the defendant had been sent advertisements

described by a customs agent as “apparently” child pornography

and on an expert opinion that was drafted without the particular

facts of the case in mind. Id. at 1344. The court found the

affidavit was overbroad and did not establish probable cause to

believe that contraband would be found in the defendant’s

residence. Id. In the present case, the warrant was narrowly

tailored to the circumstances, and probable cause for the

residential search was supported by the BOE investigators’

personal experiences that persons who engage in fraud related to

the tobacco sales keep business records in their residences.

CONCLUSION

///

///

///

///

///

///

///

///

///

Case 2:07-cv-00452-FCD-KJM Document 45 Filed 09/07/07 Page 12 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

13

In sum, claimants’ argument is an attempt to engage the

court in a technical review of the affidavit, rather than the

practical, common-sense approach mandated by Gates. Because the

court concludes that the search of Wahidi’s residence did not

violate the Fourth Amendment in that the search warrant showed

probable cause for the seizure of the items from Wahidi’s

residence, or in the alternative, that the good faith exception

to the exclusionary rule applies, claimants’ motion to suppress 

is DENIED. 

IT IS SO ORDERED.

DATED: September 7, 2007.

Case 2:07-cv-00452-FCD-KJM Document 45 Filed 09/07/07 Page 13 of 13