Mark Hamblett, New York Law Journal
The lawyer for an accountant whose hard drives were seized and held for over two years in a fraud investigation involving a client, and then used to charge the accountant himself for an unrelated crime, is hoping the U.S. Supreme Court will take his case.
Stanley Twardy of Day Pitney said he believes there’s enough division among lower courts to tempt the Supreme Court to grant certiorari in the case of Stavros Ganias, an accountant whose files were kept by U.S. Army agents investigating his client but then used by the IRS against Ganias himself in a tax prosecution.
Twardy has won once and lost twice in the lower courts in the case of Ganias, who did the accounting work for a government contractor being investigated in 2003 by the U.S. Army for theft and overbilling.
Agents with a search warrant in 2003 seized three hard drives from Ganias’ Wallingford, Connecticut, office containing client files and his own personal financial data. The agents allegedly assured Ganias they would make copies and purge every file not related to the investigation into his client.
But it was eight months before the U.S. Army Criminal Investigation Lab even began to review the electronic files for documents within the scope of the warrant.
Even after they had completed their review and separated out the relevant documents, “the investigators made no effort to purge or delete the non-responsive files in their possession that had nothing to do with” Ganias’ client, Twardy alleges in his petition.
“Instead, the agents decided to retain all of the files on Ganias’ computers indefinitely,” he said. “As one agent explained it: ‘We viewed the data as the government’s property. Not Mr. Ganias’ property.'”
In 2004, the Army decided to share the fruits of the seizure and allow the IRS to make hard copies of the imaged hard drives. In July 2005, more than 21 months after what Twardy calls the “over-seizure” of Ganias’ personal files, the IRS opened an investigation.
The IRS obtained a second search warrant in 2006, combed through the hard drives and charged Ganias with tax evasion.
Ganias’ motion to suppress was denied and the accountant was convicted in 2011 by a jury before Connecticut District Court Judge Ellen Bree Burns on two counts of tax evasion. He was sentenced to two years in prison.
A divided three-judge panel of the U.S. Court of Appeals for the Second Circuit reversed on July 3, 2014, finding a Fourth Amendment violation that warranted vacating the tax convictions.
The Fourth Amendment, Judge Denny Chin wrote, does not permit “officials executing a warrant for the seizure of particular data on a computer to seize and indefinitely retain every file on a computer for use in future criminal investigations.”
However, in a rare move for the circuit, a majority of judges voted to rehear the case en banc. Following spirited arguments in October 2015 by Twardy and assistant U.S. attorney Sandra Glover (NYLJ, Oct. 2, 2015), the full Second Circuit reversed in May, holding that the search of Ganias’ hard drives was done in good faith (NYLJ, May 31).
While acknowledging that there is often a trove of personal information “interspersed among evidentiary material that justifies the seizure or search,” the court said “it is unwise to try to reach definitive conclusions about the constitutional issues in a case that can be decided on other grounds”—the good faith of the agents involved.
Twardy’s petition says there is a conflict among lower courts on the application of the good-faith exception to predicate Fourth Amendment violations, with the Second Circuit joining four other circuits in applying the exception while other courts of appeals and lower courts have refused to extend it.
Twardy said Thursday the time is right for high court review given that courts are repeatedly confronting novel search-and-seizure issues in the context of the digital era and the Ganias case qualifies.
“We tried to show there are some disagreements in the circuits with how this is handled,” Twardy said. “The Supreme Court has been taking a look at these issues—there have been a number of decisions in recent years—and this gives them another opportunity to address application of the Fourth Amendment in the changing electronic landscape.”