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UNITED STATES v. SINGH

April 25, 1997

UNITED STATES OF AMERICA,
v.
MOHINDER I. SINGH, DERRICK W. WASHINGTON, Defendants.



The opinion of the court was delivered by: LAMBERTH

 This matter comes before the court on the several motions of defendants. Upon consideration of the parties' written submissions, oral arguments, and the relevant law, for the reasons set forth below, the court will deny each of defendants' motions.

 I. Facts

 Mohinder Singh is the owner and operator of Professional Tax Service (Protax), an income tax return preparation and financial services business in Washington D.C. Derrick Washington is the office manager of Protax, as well as the business' only full-time employee. The Internal Revenue Service (IRS) began an investigation of Protax when Claude Bordelon, an informant, first told the agency that he believed Protax was preparing false returns for individuals. Bordelon was a former employee of Protax having worked there as one of several part-time tax preparers hired during the tax season. Based on this information, the IRS began an investigation of Protax which included an undercover operation. The investigation lasted until Singh and Washington were indicted.

 Singh and Washington were indicted by a federal grand jury on April 3, 1996. In count one of the indictment, Singh and Washington are charged with conspiring to defraud the United States for the purpose of impeding the lawful government functions of the IRS in violation of 18 U.S.C. § 371. Counts two through seventeen charge Singh and Washington with aiding and assisting in the preparation and presentation of false federal income tax returns to the IRS, in violation of 26 U.S.C. § 7206(2). Counts eighteen through twenty-two charge Singh and Washington with corruptly obstructing and impeding IRS audits in violation of 26 U.S.C. § 7212(a). In count twenty-three, Singh and Washington are charged with conspiracy to obtain property of more than $ 250 from financial and mortgage lending institutions in violation of 22 D.C. Code § 105(a). Count twenty-four charges Singh and Washington with bank fraud in violation of 18 U.S.C. § 1444 and 18 U.S.C. § 2(a) and (b). Counts twenty-five through twenty-eight charge Singh with tax evasion in violation of 26 U.S.C. § 7103. Counts twenty-nine and thirty charge Washington with failure to file individual federal income taxes in violation of 28 U.S.C. § 7203.

 II. Defendants' Motions to Suppress Evidence

 Through separate motions, both Singh and Washington move the court to suppress the evidence seized by the government from the premises of Protax, 3121 Martin Luther King, Jr. Ave., S.E., Washington, D.C. Singh also asks the court to suppress the evidence seized from his residence at 8537 Old Dominion Drive, McLean, Virginia. Although the court agrees with defendants that the affidavit did not provide probable cause for the broad searches authorized by the warrants, the motions to suppress are denied because the court finds the officers acted in good faith reliance on the warrants, each of which was approved by a detached and neutral magistrate judge.

 A. Facts

 IRS Special Agent Robert J. Van Shufflin provided the sworn affidavit used to support the requests for search warrants for both addresses. In the short, nine-page affidavit, Van Shufflin provided minimal information on the allegedly illegal activities at Protax. First, Van Shufflin stated that the IRS Criminal Investigation Division (CID) had learned from the Philadelphia Service Center that 98% of the returns prepared by Protax for the tax years 1989, 1990, 1992, and 1993 resulted in refunds as opposed to the national average of 75% reported by the IRS 1992 Annual Report. Second, Van Shufflin stated that a confidential informant provided CID with the information that Protax charges approximately $ 250.00 for the preparation of a tax return. Third, Van Shufflin described in great detail the interaction of an IRS undercover agent with Protax that led to the preparation of two sets of allegedly false tax returns.

 B. Analysis

 Defendants challenge the warrants on two different, but necessarily related grounds. Specifically, defendants argue that the warrants are "general" warrants because they did not identify with particularity the places to be searched and the items to be seized. Additionally, defendants argue that the affidavit used to support the warrants did not establish probable cause for the searches.

 The fourth amendment states that a search warrant must "particularly describe the place to be searched, and the persons or things to be seized." U.S. Const. amend IV. Thus, the fourth amendment prohibits "the general, exploratory rummaging [of] a person's belongings." United States v. Maxwell, 287 U.S. App. D.C. 234, 920 F.2d 1028, 1031 (D.C. Cir. 1990). "By limiting searches 'to the specific areas and things for which there is probable cause to search, the [particularity] requirement ensures that the search will be carefully tailored to its justifications, and will not take on the character of wide-ranging exploratory searches the Framers intended to prohibit.'" Id., quoting Maryland v. Garrison, 480 U.S. 79, 84, 94 L. Ed. 2d 72, 107 S. Ct. 1013 (1987).

 The D.C. Circuit has held that a search warrant may be construed with reference to the affidavit supporting it for purposes of meeting the particularity requirement. Maxwell, 920 F.2d at 1031. Because the Van Shufflin affidavit accompanied each warrant as an attachment, the court finds that it was properly incorporated, and will construe each warrant together with the affidavit.

 Defendants argue that the warrants fail to describe in detail the places to be searched and the items to be seized. The court easily disagrees with defendants' characterizations. Both the office and the house are described by address on the first page of each warrant and by a detailed description attached to the warrants as Exhibit A. Furthermore, Exhibit B, referenced by and attached to each of the warrants, describes in fair detail the many records to be taken and thus left the executing officers with no discretion to determine what was and what was not included in the search. Cf. United States v. Offices Known as 50 State Distributing Co., 708 F.2d 1371, 1374 (9th Cir. 1983).

 The court must next decide if authorization of such broad warrants was supported by probable cause. Defendants argue that Van Shufflin's affidavit fell far short of establishing probable cause for such broad warrants, and the court agrees. The effect of the warrants was that all of the business records of Protax could be seized and all of the financial documents of Singh could be seized from his home. Nothing in the affidavit supported a finding that all of these documents were used in illegal activity.

 In examining the affidavit to see if it establishes probable cause for the broad searches, the court recognizes the proper standard of review is one of great deference to the magistrates' determination of probable cause. United States v. Leon, 468 U.S. 897, 914, 82 L. Ed. 2d 677, 104 S. Ct. 3405 (1984). Roughly defined, probable cause exists "when known facts and circumstances are sufficient to warrant a man of reasonable prudence in the belief that an offense has been or is being committed. United States v. Davis, 147 U.S. App. D.C. 400, 458 F.2d 819, 821 (D.C. Cir. 1972)(cites omitted). The probable cause requirement is not a rigid one, but rather, one based on common-sense. Texas v. Brown, 460 U.S. 730, 742, 75 L. Ed. 2d 502, 103 S. Ct. 1535 (1983).

 Even giving great deference to the decisions of the two magistrate judges, this court cannot conclude that the affidavit provided probable cause for the broad searches authorized by the search warrants. The information simply falls far short.

 The government argues that the statistical evidence showing that 98% of the returns prepared by Protax resulted in refunds is sufficient. The court cannot agree as the affiant made no attempt to put the numbers given to the magistrate judges into a relevant context or to provide the magistrate judges with any information so that the one statistic would be meaningful.

 Similarly, the fact that the average charge for a return prepared by Protax is $ 250 provides absolutely no basis for determining that Protax is permeated with fraud. The affiant failed to give any additional information that would place this number in context or help to explain why this average charge is indicative of fraud.

 The only remaining information provided by Van Shufflin is the detailed description of the undercover agent's interaction with the two defendants which led to the preparation of two sets of allegedly false returns. Defendants argue that Van Shufflin's description was misleading in that he did not adequately portray the events as evidenced by the tape recordings. Having reviewed the tape transcripts submitted by defendants, the court believes that the description is in fact accurate. However, this one event is not sufficient for a finding of probable cause to support the seizure of all business records at Protax or all the records from the Virginia residence.

 It is true that courts have recognized the problems officers face when preparing affidavits in support of search warrants for business records. Often it is not possible to distinguish between records that would provide evidence for the alleged crimes from those that would not. Thus, it may be difficult to write a sufficiently particular warrant for the documents for which there is probable cause to seize. To address these problems, courts have allowed more general warrants to proceed when applicants for warrants can either show probable cause to believe that more detailed descriptions are not possible, or by showing probable cause to believe that the entire business is permeated with fraud. United States v. Diaz, 841 F.2d 1, 4 (1st Cir. 1988)("seizing business records in a fraud investigation presents special problems for investigators attempting to draft warrants"), Offices Known as 50 State Distributing Co., 708 F.2d at 1374 (concluding that it was impossible through a more particular description to segregate the business records that would be evidence of the alleged crime from those that would not be evidence).

 No where in his affidavit did Van Shufflin allege that Protax was permeated with fraud. Nor did he state that he was unable to more particularly describe the papers. More importantly, he did not provide either magistrate judge with sufficient information that would allow them to draw this conclusion on their own.

 To better understand the insufficiency of the affidavit, it helps to compare it with others which the courts found establish probable cause to believe that a business was permeated with fraud or illegality. For example, in United States v. Brien, the magistrate judge relied upon numerous affidavits to find probable cause. 617 F.2d 299 (1st Cir. 1980). In one affidavit, the affiant described his analysis of the complaints of seventy-five customers, interviews with twenty former employees, and his review of other files. He described the operations of the company in great detail. Additionally, a second affiant described the more than 170 complaints that his office had received and described a practice of fraud just like the one described by the first affiant. Thus, the court concluded that "the two hundred-fifty complaints that surfaced could fairly be inferred to be only the tip of the iceberg." Id. at 307.

 Similarly, in Offices Known as 50 State Distributing Co., the search warrant was issued on the basis of a twenty-seven page affidavit in which information had been provided by an private investigator who had gained employment with the company, by the manufacturers the company had falsely claimed to represent as well as by several victims of the company's fraudulent conduct. 708 F.2d at 1372. The private investigator had enrolled in a one week training course offered by the company and had observed and overheard at least seven of the company's salesmen at work. Because of his ...


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