Opinion ID: 3066115
Heading Depth: 4
Heading Rank: 1

Heading: Kahre’s Motions To Suppress

Text: In his search warrant affidavit, Internal Revenue Service (IRS) Special Agent Jared Halper observed that, although Kahre’s businesses were generating significant revenues, Kahre had not filed business tax returns or employment taxes since the early 1990s. Kahre also had not filed individual tax returns since 1991. Agent Halper averred that Kahre leased employees to various contractors, and withdrew cash from Bank of the West for the payroll. According to Agent Halper, Kahre withdrew $24,096,012 in cash between January 17, 2002, and 8 UNITED STATES V. KAHRE October 31, 2002. Kahre’s employees collected their wages at a warehouse located at 6270 Kimberly Avenue in Las Vegas. The employees received nominal amounts of gold certificates or gold chips, which they immediately exchanged for envelopes of cash. Kahre allegedly withheld “sixty percent of the employees’ payroll. . . .” Based on Kahre’s conduct, Agent Halper stated that there was probable cause to believe that Kahre was engaged in a conspiracy to evade taxes and to interfere with the administration of the tax laws by the IRS. Agent Halper’s affidavit reflected that evidence of Kahre’s criminal activities could be found at the 6270 Kimberly Avenue, 6295 Grand Canyon, and 1555 Bledsoe Lane addresses (The Kimberly, Grand Canyon, and Bledsoe properties). In his declaration, Agent Halper related that IRS agents reviewed the search warrant affidavit prior to the searches. Kahre was subsequently arrested at Bank of the West pursuant to a state bench warrant for failure to appear, and the agents seized $230,913 in cash, which was provided to the IRS to satisfy Kahre’s “unpaid federal income tax liabilities.” According to Agent Halper, Kahre had unpaid tax assessments of approximately $2,000,000. The district court ruled that Kahre’s motion to suppress evidence seized when Kahre was arrested at Bank of the West was moot because the seized evidence would not be used at trial. The district court also determined that the government was not required to return the cash seized from Kahre because it was used to offset Kahre’s tax liabilities. The district court granted in part and denied in part Kahre’s amended motions to suppress evidence seized from UNITED STATES V. KAHRE 9 the Kimberly, Bledsoe, and Grand Canyon properties. Because Kahre was not present during the execution of the search warrants, the district court held that Kahre lacked standing to challenge the manner in which the search warrants were executed. The district court concluded that, because the search warrant properly incorporated the search warrant affidavit, the warrant was not overly broad. The district court also held that the agents properly seized gold and silver coins relating to Kahre’s payroll scheme. However, the district court granted Kahre’s motion to suppress information and documents that were unrelated to the time periods specified in the warrants. 2. Appellants’ Motions To Disqualify the Prosecutor For Conflict of Interest On October 30, 2003, several plaintiffs, including the Kahres, filed a Bivens action against the federal prosecutor, as well as other federal defendants. The complaint alleged, inter alia, that the federal defendants orchestrated an illegal raid of Kahre’s properties, improperly arrested Kahre and stole $230,913 in cash from him. On October 4, 2004, the district court in the Bivens action denied the prosecutor’s motion to dismiss premised on absolute immunity. Treating the complaint’s allegations as true, the court denied absolute immunity because of the prosecutor’s alleged involvement in planning the raids. The government subsequently filed two indictments against Appellants, and the district court in the Bivens case granted the government’s emergency motion to stay the proceedings based on the pending criminal prosecutions. During the first trial, the jury was unable to reach verdicts, 10 UNITED STATES V. KAHRE and the government subsequently filed the Third Superseding Indictment. Prior to the second trial, Kahre renewed a prior motion to disqualify the prosecutor because of a conflict of interest. In an attached declaration, Kahre’s counsel related that the prosecutor had remarked that Kahre’s counsel had “threatened [his] job and [his] pension,” making the case “personal.” Kahre filed a subsequent motion to disqualify the prosecutor because of his pecuniary and emotional interests in the Bivens action, and because the prosecutor had filed the indictments as retaliation for being named in the Bivens action. The district court denied Kahre’s motion, ruling that automatic disqualification was not warranted due to the pendency of a Bivens action, and that the prosecutor’s comments did not require disqualification on the merits. 3. Appellants’ Motions To Dismiss the Indictments Based on the Gold and Silver Coins’ Valuation Appellants asserted that they lacked the requisite notice that their payroll payments in gold and silver coins were taxable at the coins’ fair market value and that their conduct violated the tax laws. They contended that the lack of notice in the statutory language compelled application of the rule of lenity, resulting in a construction of the statute that was most favorable to them. The district court rejected the Appellants’ argument, explaining that the applicable statutes were unambiguous regarding the elements of conspiracy to defraud the government and of willful failure to truthfully account for taxes owed. The district court added that the statutes’ scienter requirements mitigated any vagueness and that the UNITED STATES V. KAHRE 11 tax provisions patently articulated reporting and filing requirements. The district court eschewed Appellants’ argument that they did not defraud the government because gold and silver coins used to pay employees should have been assessed at face value, rather than fair market value, for tax purposes. If, for example, an employee was paid with ten silver dollar coins, Appellants would argue that the employee received only ten dollars in wages. However, if each silver dollar had a fair market value of fifty dollars, the government assessed the wages at 10 x $50 or $500.00. The district court was persuaded that Ninth Circuit precedent, as well as that of other courts including the Tax Court, required taxation of the coins at fair market value. The district court observed that the tax code and corresponding Treasury regulations treated property, such as gold and silver coins used as compensation for services rendered, as taxable at fair market value.