Opinion ID: 65776
Heading Depth: 2
Heading Rank: 2

Heading: Gregory Setser IssueConduct of Law Enforcement Officials

Text: Setser next argues that law enforcement officials violated his Fourth Amendment rights in their conduct after they took possession of records and assets from the receiver. He suggests that because the receiver lacked the authority to seize all the documents he took, law enforcement agents needed to obtain a warrant in order to review the information obtained from the receiver. In our previously discussed Gray opinion, we found that a property owner no longer had a reasonable expectation that those records would remain private once a court has appointed a receiver, and the receiver has taken custody of records under the authority given him. Gray, 751 F.2d at 737. There is, in other words, no violation of the Fourth Amendment for a receiver who is the lawful custodian of the records to turn them over to law enforcement agents, at their request. Id. Though Gray 's analysis is relatively brief, its logic is clear when read in conjunction with the statutes governing the appointment and conduct of receivers. A receiver is vested with complete jurisdiction and control of all such [received] property with the right to take possession thereof. 28 U.S.C. § 754. A receiver shall manage and operate the property in his possession ... in the same manner that the owner or possessor thereof would be bound to do if in possession thereof. Id. § 959(b). Understanding the receiver's authority, we now examine what must be shown to establish a Fourth Amendment violation. A defendant must show that he had a reasonable expectation of privacy in the property searched. United States v. Gomez, 276 F.3d 694, 696-97 (5th Cir. 2001). The showing requires the defendant to prove (1) an actual, subjective expectation of privacy, and (2) that the expectation is one which society would recognize as reasonable. United States v. Kye Soo Lee, 898 F.2d 1034, 1037-38 (5th Cir.1990). Because the first factor simply examines whether a defendant actually expected privacy, which is not difficult to assert, the dispositive factor is almost always the second one. This second factor, the reasonableness of a privacy expectation, can be viewed from several practical perspectives: whether the defendant has a possessory interest in the thing seized or the place searched, whether he has the right to exclude others from that place, whether he has exhibited a subjective expectation that it would remain free from governmental invasion, whether he took normal precautions to maintain his privacy and whether he was legitimately on the premises. Gomez, 276 F.3d at 697-98 (quoting United States v. Haydel, 649 F.2d 1152, 1155 (5th Cir. Unit A July 1981)). We consider what occurred in the present case in terms of the list we just quoted from our precedents. Once the receiver took possession of the property, Setser's possessory rights were lost. Setser could neither exclude others from the seized property nor take precautions to maintain the privacy of the property. After appointment, the receiver was vested with complete jurisdiction and control of the property and had the right to take possession of it. 28 U.S.C. § 754. The receiver was required to manage and operate the property ... in the same manner as its original owner. Id. § 959. The receiver became the possessor, and as such could consent to the search of the seized documents. E.g., United States v. Brigham, 382 F.3d 500, 512 (5th Cir.2004) (en banc). We also find justification for what occurred from the fact that a receiver is to be appointed only after a prima facie showing of fraud and mismanagement. SEC v. First Fin. Group of Tex., 645 F.2d 429, 438 (5th Cir. Unit A May 1981). It would make little sense to hold that Setser continued to exercise veto power over the receiver's uses of his property when the purpose of the receivership was to preserve assets from fraudulent depletion. We conclude that after a receiver validly takes possession of records and other property, becoming their lawful custodian, the original owner has lost any reasonable expectation that those records would remain private. Gray, 751 F.2d at 737. Accordingly, Setser's Fourth Amendment rights were not violated when the receiver turned over the property he seized from Setser to law enforcement officials.
Setser would have us find that the government impermissibly mixed the receiver's civil investigation with the criminal case against him. The purpose, Setser argues, was to deprive him of the rights criminal defendants enjoy, while using more liberal civil discovery techniques to gain evidence for the criminal case. Setser argues that because the governmental parties intentionally ... orchestrated their actions and manipulated the administration of criminal justice in order to secure documents and papers to be used in the criminal prosecution, the district court erred in refusing to suppress the evidence discovered in the receiver's search and then turned over to the FBI. Setser asks this court to find that this behavior violated both the Fourth Amendment and his Fifth Amendment right to due process of law. He alleges that the proper remedy is either dismissal of the indictment or remand for a hearing on what evidence should have been suppressed. Setser argues that the Government may not bring a parallel civil proceeding and avail itself of civil discovery devices to obtain evidence for subsequent criminal prosecution. United States v. Parrott, 248 F.Supp. 196, 202 (D.D.C.1965). The precedents on which he relies have a Supreme Court ruling as their source. See United States v. Kordel, 397 U.S. 1, 90 S.Ct. 763, 25 L.Ed.2d 1 (1970). We examine that original authority, then turn to the more recent authorities. In Kordel, the Court distinguished its facts from five situations in which a finding of a constitutional due process violation might be made: We do not deal here with a case where [1] the Government has brought a civil action solely to obtain evidence for its criminal prosecution or [2] has failed to advise the defendant in its civil proceeding that it contemplates his criminal prosecution; [3] nor with a case where the defendant is without counsel or [4] reasonably fears prejudice from adverse pretrial publicity or other unfair injury; nor [5] with any other special circumstances that might suggest the unconstitutionality or even the impropriety of the criminal prosecution. Id. at 11-12, 90 S.Ct. 763 (numbering added). The precedents cited by Setser involved situations in which one or more of these Kordel situations existed. In one, the government coordinated a civil SEC investigation with a criminal investigation and deceived the defendants into believing there was no criminal investigation. United States v. Stringer, 408 F.Supp.2d 1083, 1087-88 (D.Or.2006), rev'd, 535 F.3d 929 (9th Cir.), cert. denied, ___ U.S. ___, 129 S.Ct. 658, 172 L.Ed.2d 616, cert. denied, ___ U.S. ___, 129 S.Ct. 662, 172 L.Ed.2d 616, cert. denied, ___ U.S. ___, 129 S.Ct. 663, 172 L.Ed.2d 616 (2008). The district court had dismissed the indictment after finding that the government impermissibly develop[ed] a criminal investigation under the auspices of a civil investigation. Id. at 1089. After Setser filed his opening brief in this case, the Ninth Circuit disagreed and reversed. The court of appeals relied on the fact that the SEC made no affirmative misrepresentations to the defendants, disclosed the possibility of a criminal investigation on a form, and engaged in no tricks to deceive defendants. Stringer, 535 F.3d at 940. In the other principal case relied on by Setser, the trial court found that the government coordinated two investigations in a manner intended to mislead the defendants into believing there was no criminal investigation against them, including obtaining the defendants' depositions in the civil investigation with the intent to create evidence against them in the criminal case. United States v. Scrushy, 366 F.Supp.2d 1134, 1138-39 (N.D.Ala.2005). In the court's view, the government's overall coordination of the investigations, and especially its apparent arrangement of a deposition in the civil case to create a perjury trap for criminal prosecution purposes, while not informing the defendant that any criminal investigation was under way, was such an impermissible departure. Id. at 1139-40. Although the government did not outright lie to the defendant, it manipulated the inescapably intertwined investigations to an extent the district court found improper. Id. A recent decision by this circuit refused to find impermissible commingling of civil procedures involved in an interview conducted for possible naturalization of an immigrant and criminal investigations into that immigrant's conduct. United States v. Posada Carriles, 541 F.3d 344, 356 (5th Cir.2008), cert. denied, ___ U.S. ___, 129 S.Ct. 1657, ___ L.Ed.2d ___ (2009). We restated the fundamental point that the government may conduct simultaneous civil and criminal proceedings without violating the due process clause or otherwise departing from proper standards in administering justice. Id. at 354. Deception as to the purposes of the investigation, or using otherwise meaningless civil proceedings as a pretext for acquiring evidence for a criminal prosecution, taking advantage of a person who does not have counsel, or other special circumstances may invalidate the prosecution. Id. Setser can point to no trickery or cloaking of the criminal investigation as civil. Setser was not lured into any cooperation by the false premise that the investigation was purely civil. There is likewise no self-incrimination issue here, a common theme in the other cases. Ultimately, Setser's argument fails on the facts. He does not present evidence of strategic, intentional cooperation of the sort the district courts in Stringer and Scrushy found damning. For example, Setser claims that the governmental parties had been cooperatively investigating and communicating... for months prior to the searches. But, as the government points out, his only record support for this assertion is a single phone call from an investigator from the Texas State Securities Board to an FBI agent assigned to the case. Setser does not provide evidence to contradict the government's assertion (and district court's conclusion) that the state investigator was herself on the criminal side of the probe. Setser also points to the coordination inherent in the FBI's execution of arrest warrants at the same time as the receiver's agents were conducting their search of Setser's home and other premises. The government acknowledges that the two groups communicated in advance, but claims their cooperation was limited to logistical concerns such as ensuring the receiver did not interfere with the conduct of the arrests. Some of the search protocols for the receiver's team referred to the FBI as having some role in terminating modem connections, and the receiver apparently permitted the FBI to review some documents before he himself reviewed them. Setser made these points to the district court, which found that the FBI did not help formulate the search protocols. Whether or not the receiver read documents before permitting the FBI to access them seems of little relevance, if he validly took possession of them pursuant to the Receivership Order. Certainly the chain of events leading to the FBI's possession of the documents was helpful for the government. Still, we find no facts in the record to support a finding of clear error when the district court found no invalid cooperation between the civil and criminal investigations.