Opinion
CRIMINAL NO.: WDQ-13-0662
04-09-2015
UNITED STATES OF AMERICA, Plaintiff, v. NIKOLAY ZAKHARYAN, et al., Defendants.
MEMORANDUM OPINION
Nikolay Zakharyan ("N. Zakharyan") is charged with conspiracy to traffic in contraband cigarettes and trafficking in contraband cigarettes. ECF No. 214. Pending are N. Zakharyan's pretrial motions. A hearing was held on April 2, 2015. ECF No. 243. For the following reasons, N. Zakharyan's motion to adopt pertinent co-defendant motions will be granted; all other motions will be denied. I. Background
Because many of the alleged parties to the cigarette trafficking scheme underlying these charges have the same last name, the defendant, and others, will be referred to by their first initial and last name.
18 U.S.C. § 371(2012).
18 U.S.C. § 2342(a)(2012).
Trial is scheduled to begin on April 20, 2015. This Memorandum Opinion resolves motions made or adopted by N. Zakharyan.
N. Zakharyan has moved to adopt pertinent codefendant motions. ECF No. 158. His motion to adopt requests procedural relief (i.e., permission to adopt the codefendant's motion) that will be granted. The substantive relief sought by the codefendant's motion and N. Zakharyan's adopted motion will be denied.
The facts are from the indictment, relevant papers, attached exhibits, and the rough transcript of testimony at the motions hearing.
1. Overview of the Crime
This case arises from a contraband cigarette trafficking scheme allegedly involving N. Zakharyan and others. ECF No. 214. In March 2009, the Baltimore County Police Department ("BCPD") received tips from two "concerned citizens" that businesses owned by three brothers--Elmar Rakhamimov, Timur Yusufov, and Salim Yusufov--had been engaging in criminal activity. ECF Nos. 209 at 2; 209-2 ¶ 35. The concerned citizens reported that Healthway Pharmacy, owned by S. Yusufov, had been receiving and distributing FDA-banned drugs from Russia, and committing healthcare fraud. ECF No. 209 at 2.
The term "contraband cigarettes" means a quantity of cigarettes "in excess of 10,000 cigarettes, which bear no evidence of the payment of applicable State or local cigarette taxes in the State or locality where such cigarettes are found, if the State or local government requires a stamp, impression, or other indication to be placed on packages or other containers of cigarettes to evidence payment of cigarette taxes." 18 U.S.C. § 2341(2). Maryland and New York require tax stamps on packages as evidence of payment of state cigarette taxes. ECF No. 214 ¶ 7.
The original indictment charged Salim and Timur Yusufov, Elmar, Ilgar, and Yuliya Rakhamimov, Zarakh Yelizarov, Adam Azerman, Shamil Novakhov, Ruslan Ykiew, and Artur Zakharyan with various offenses, including conspiracy to traffic in contraband cigarettes, trafficking in contraband cigarettes, distribution of oxycodone, money laundering, and sale of a drug sample. ECF No. 1. Those defendants' cases have been resolved through plea agreements, deferred prosecution agreements, or dismissal. See ECF Nos. 123, 139, 143, 190, 191, 201, 212, 218, 229, 241.
Those businesses included, among others, Europe Restaurant and Healthway Pharmacy in the Pikesville area of Baltimore County. ECF No. 209 at 2 n.1. In 2006, the BCPD and the Federal Bureau of Investigation ("FBI") investigated Europe Restaurant for receipt of stolen goods, distribution of cocaine, and unlawful firearms possession. Id. at 2-3.
In May 2009, a confidential informant ("CI #5631") told BCPD Detective Ryan Cooper that S. Yusufov obtained banned Russian medications from a source in New York and sold them at Healthway Pharmacy. Id. at 3. According to CI #5631, S. Yusufov had been billing Medicaid and Medicare for unfilled prescriptions. Id.
In July 2010, the FBI had a confidential human source ("CHS-1") approach S. Yusufov at Healthway Pharmacy to assess the scope of criminal activity. Id.; ECF No. 209-2 ¶ 40. On July 23, 2010, CHS-1 visited the pharmacy to fill prescriptions ECF No. 209 at 4. CHS-1 asked S. Yusufov for Corvalol, an unapproved Russian drug, instead of one of his prescribed medications. Id. S. Yusufov gave CHS-1 Corvalol and billed Medicaid for the unfilled prescription. Id.
On five occasions from July 2010 to July 2011, S. Yusufov gave CHS-1 Corvalol instead of his prescribed medication, and billed Medicare or Medicaid. Id. at 4.
On July 24, 2010, CHS-1 visited Europe Restaurant to develop personal ties with S. Yusufov. Id. S. Yusufov asked CHS-1 and his friends what they did for a living. Id. One friend replied that he was a jeweler; another that he was a real estate agent. Id. at 5. S. Yusufov asked CHS-1 if he was a "mobster." Id. CHS-1 replied, "[n]o, I'm just a businessman." Id. S. Yusufov said, I'm a businessman like you," took CHS-1's phone number, and said they would be best friends. Id.
In August 2010, S. Yusufov gave CHS-1 the name of a physician who "would give him whatever he wants." Id. Later that month, S. Yusufov asked CHS-1 what kind of business he was in. Id. CHS-1 replied, "Export-Import," to which S. Yusufov responded, "What do you export? Tell me. We'll make some extra money." Id. CHS-1 said he would "talk to [him] later." Id.
On August 25, 2010, S. Yusufov told CHS-1 that he obtained Russian drugs from New York. Id. Over lunch, CHS-1 told S. Yusufov that he had been involved in trucking and loan sharking, but now has a source for Medicaid cards. Id. S. Yusufov responded that using fake Medicaid cards "was fraud," but that "an easy fraud scheme" involved buying and selling prescription drugs for a profit. Id. When they next met, S. Yusufov told CHS-1 that using Medicaid cards was not a good idea, in part, "because they couldn't make 'big money.'" Id. S. Yusufov and CHS-1 discussed meeting later in the week; afterward, S. Yusufov called CHS-1 twice to arrange the meeting. Id.
On October 9, 2010, CHS-1 visited Europe Restaurant with his family while S. Yusufov was there. Id. at 6. When CHS-1 and S. Yusufov went outside to talk, S. Yusufov asked CHS-1 if he dealt in drugs. Id. CHS-1 stated that he dealt in alcohol and cigarettes, not drugs. Id. S. Yusufov told CHS-1 that he would introduce him to a "connected" figure in Baltimore's Russian community. Id.
This conversation was not recorded. ECF No. 235 at 3.
On October 15, 2010, S. Yusufov introduced CHS-1 to a liquor storeowner who wanted to buy untaxed alcohol. Id. When they left the store, S. Yusufov complained to CHS-1 about needing money. Id. S. Yusufov also told CHS-1 that his brother, E. Rakhamimov, had buyers for untaxed cigarettes and liquor. Id. S. Yusufov wanted to arrange a meeting with CHS-1 and E. Rakhamimov at Europe Restaurant the next day; however, S. Yusufov was concerned about maintaining his role as middle man. Id. at 6-7.
On October 19, 2010, CHS-1 and S. Yusufov met at Healthway Pharmacy and discussed contraband cigarette transactions. Id. at 7. S. Yusufov asked what brand of cigarettes CHS-1 would provide, and suggested that he had a New York buyer and that E. Rakhamimov had discussed becoming involved in the transactions. Id. Less than a week later, S. Yusufov told CHS-1 that he had another buyer for untaxed alcohol. Id.
On October 30, 2010, CHS-1 met S. Yusufov and E. Rakhamimov at Europe Restaurant to discuss cigarette and alcohol transactions. Id. E. Rakhamimov said he was interested in both, and asked CHS-1 for his phone number. Id. CHS-1 privately told S. Yusufov that he would receive a $200 kickback for each case of cigarettes CHS-1 supplied. Id.
On December 13, 2010, S. Yusufov told CHS-1 that he was ready to receive the cigarettes, and described another scheme involving bottled water. Id. S. Yusufov told CHS-1 "you need to engage in criminal activity in the U.S. in order to stay in business and make money." Id.
On February 18, 2011, CHS-1 visited Healthway Pharmacy to collect a prescription. Id. at 8. S. Yusufov asked him when they were going to do business together, and complained that people he had told about the cigarettes "were beginning to think he [was] a 'bullshitter.'" Id. Four days later, S. Yusufov again asked CHS-1 about the cigarettes; CHS-1 replied that "he had lost the ability to move the product, but that he was working on it." Id.
On July 14, 2011, CHS-1 told S. Yusufov that he was ready to begin the cigarette operation. Id. S. Yusufov asked for samples and said that his brother and another buyer were interested. Id.
On July 18, 2011, CHS-1 met S. Yusufov at Europe Restaurant. Id. According to S. Yusufov, E. Rakhamimov had lost interest in buying the cigarettes. Id. S. Yusufov asked if the cigarettes could be delivered to New York, and how much money he would make per case. Id. S. Yusufov also offered to introduce CHS-1 to someone who dealt in stolen or counterfeit watches. Id. at 8-9.
On August 17, 2011, S. Yusufov arranged a meeting between CHS-1 and a cigarette buyer. Id. at 9. The prospective buyer took samples of the cigarettes but never initiated any orders. Id.
On October 24, 2011, CHS-1 gave samples to S. Yusufov for another interested buyer. Id. On October 28, 2011, S. Yusufov told CHS-1 that the new buyer was very serious but wanted more samples. Id. S. Yusufov said that he wanted to buy 200 cases for the new buyer, which would be delivered to New York. Id. CHS-1 responded that 200 cases would be too many for the first deal, but S. Yusufov insisted. Id.
On November 10, 2011, CHS-1 gave S. Yusufov additional cigarette samples and said that he would supply 20 cases for the first deal. Id.
On November 19, 2011, CHS-1 met the "new" buyer--E. Rakhamimov--at Europe Restaurant. Id. E. Rakhamimov told CHS-1 that he wanted 20 master cases of Parliament 100 brand cigarettes, which would sell for $45 per carton in New York. Id. at 9-10; ECF No. 209-2 ¶ 47.
See also ECF No. 214 ¶ 18(a). This meeting was not recorded. ECF NOS. 209-2 ¶ 47; 235 at 3.
A master case contains 30 or 60 cartons of cigarettes, depending on the brand. ECF No. 209 at 8 n.9. Each carton has ten packs of 20 cigarettes. Id.
See also ECF No. 214 ¶¶ 18 (a)-(aaa). E. Rakhamimov paid $30 per carton; over time, E. Rakhamimov paid CHS-1 about $5.4 million for the contraband cigarettes. Id. ¶ 4.
From December 7, 2011 to November 7, 2013, 18 cigarette transactions occurred, ranging from 20 to 500 cases per transaction. ECF No. 209 at 10-11. On December 7, 2011, CHS-1 delivered the first batch of 20 cases to Chesapeake Monuments, an Owings Mills, Maryland business owned by E. and I. Rak-hamimov. Id. at 10. Thereafter, CHS-1 delivered the cigarettes to E. Rakhamimov's home. Id. at 11.
Every transaction was audio and video recorded. ECF No. 209 at 11. Along with CHS-1, an undercover FBI agent was present at every transaction except the first. Id.
On February 22, 2012, after the third cigarette transaction, CHS-1 and UCE-4815 met S. Yusufov at Healthway Pharmacy to provide him with an $8,200 "kickback" from the transaction. Id. at 16. CHS-1 complained that E. Rakhamimov had requested samples even though he had already purchased cases of cigarettes. Id. S. Yusufov told CHS-1 to "[c]hill." Id. When CHS-1 responded, "[h]uh?," S. Yusufov again told CHS-1 to "[c]hill," and stated "Yeah, we are Russian mafia." Id.
At some time, E. Rakhamimov expressed interest in importing or exporting shipping containers of contraband cigarettes with the assistance of corrupt Newark, New Jersey customs officials, and in supplying CHS-1 and undercover agents with black market drugs. ECF No. 209-2 ¶ 53.
CHS-1 introduced E. Rakhamimov to two FBI undercover agents: UCE-3281 and UCE-4815. ECF No. 209-2 ¶ 53. UCE-3281 posed as the "primary supplier and boss." Id.
Before each delivery, E. and I. Rakhamimov and A. Zakharyan discussed the transaction over the telephone and in person, and met at E. Rakhamimov's home to compile and count the money for the cigarettes. ECF No. 209 at 11. After the deliveries, they met at E. Rakhamimov's house or Europe Restaurant to discuss transporting the cigarettes to New York. Id.
From December 2011 to June 2012, R. Ykiew--S. Novakhov's nephew--drove the cigarettes to New York, where they were sold to S. Novakhov. Id. at 12-13.
Beginning in August 2012, A. Zakharyan's contact, Azerman, drove the cigarettes to New York. Id. at 13.
Beginning in May 2012, A. Zakharyan had N. Zakharyan attend and assist with the deliveries. Id. at 12. In addition to participating in the purchases, N. Zakharyan moved the cigarettes from the delivery truck into E. Rakhamimov's garage, ensured the correct number and type of cigarettes had been delivered, and wrapped the cases in black trash bags to cover the markings. Id. at 12. N. Zakharyan also loaded the cigarettes for transport to New York. Id.
See, e.g., ECF No. 214 ¶ 18(p).
In May or June 2012, UCE-3281 asked E. Rakhamimov to provide Oxycodone as partial payment for the cigarettes. Id. at 13. On June 12, 2012, E. Rakhamimov told CHS-1 that he had a source of legitimate and fake Ukranian pharmaceuticals. Id. In September 2012, E. Rakhamimov gave CHS-1 fake Viagra drugs to present to UCE-3281 for approval, and said that he was looking into obtaining Oxycodone. Id. E. Rakhamimov worked with A. Zakharyan to further the drug scheme. Id. at 14. From September 2012 to October 2013, about 3,000 Oxycontin pills, 500 Oxycodone pills, and 10,000 fake Cialis and Viagra pills were provided as partial payment for the contraband cigarettes. ECF No. 209-5 at 25.
On January 16, 2013, four men carjacked, kidnapped, and robbed the son of the owner of Antony Jewelers, located in Owings Mills, Maryland. ECF No. 209 at 15. The robbers forced the victim to provide the jewelry store's alarm codes; thereafter, they entered the store and stole about $450,000 in jewelry. Id. On January 17, 2013, E. Rakhamimov told CHS-1 that he had a million dollars' worth of "hot" jewelry. Id. On January 18, 2013, CHS-1 went to E. Rakhamimov's home to inspect the jewelry. Id. "S.Y.," Yelizarov's son, was at E. Rakhamimov's home. Id. S.Y. and E. Rakhamimov wore gloves while showing CHS-1 the jewelry. Id. CHS-1 bought some of the jewelry--later identified as stolen from Antony Jewelers--for $29,000. Id.
2. Wiretaps
On April 16, 2013, Judge Catherine C. Blake, U.S. District Judge for the District of Maryland, authorized wiretaps on two cellular telephone numbers used by E. Rakhamimov, 443-220-5356 ("Target Telephone #1," or "TT1") and 410-591-9884 ("Target Telephone #2," or "TT2"). See ECF Nos. 209-1 (Amended Application), 209-2 (Amended Affidavit in Support of the Application), 209-3 (Amended Order). From April 17, 2013 to May 17, 2013, the government intercepted wire transmissions over TT1 and TT2. ECF No. 209 at 38. On May 31, 2013, and July 2, 2013 Judge Blake authorized 30 day extensions on the TT1 wiretap. Id. On July 23, 2013, Judge Blake authorized a wiretap for cellular telephone number 443-939-4877 ("Target Telephone #3," or "TT3"), used by Yelizarov. Id. at 39. Interception of TT3 ended on August 22, 2013. Id.
The government had not sought renewal for the TT2 wiretap. ECF No. 209 at 38.
3. Searches, Seizures, and Statements
On December 11, 2013 officers executed a search warrant at N. Zakharyan's home. ECF No. 156. During the search, officers seized nine master cases of Davidoff cigarettes lacking tax stamps and $1,500 in cash. ECF No. 209 at 17. N. Zakharyan arrived home during the search, was arrested, and transported to the FBI Baltimore field office in Woodlawn, Maryland. Id.
N. Zakharyan apparently lived at 5001 Hollington Drive, Unit 105, Owings Mills, Maryland 21117 ("5001 Hollington Drive"). ECF Nos. 156 at 1; 209-5 at 65.
CHS-1 had only supplied to E. Rakhamimov Marlboro and Parliament brand cigarettes. ECF No. 209 at 11 n.12. Before this investigation, A. Zakharyan had trafficked Davidoff cigarettes; after the investigation began, A. Zakharyan shipped Davidoff cigarettes and brands supplied by CHS-1 to New York. Id.
N. Zakharyan returned home from the hospital where he had been visiting his father. Rough Hr'g Tr. at 34:17-22.
N. Zakharyan was taken to the FBI field office because the operation had been a joint investigation of the FBI and BCPD. Id. at 35:6-12. The interview was not audio- or video-recorded. Id. at 36:24-37:18.
At the field office, N. Zakharyan was placed in a room where he was interviewed by Detective J. Connors and Special Agent Stacey Bradley; he was not handcuffed or shackled, and neither officer had service weapons on them during the interview. Rough Hr'g Tr. at 28:9-10; ECF No. 209-8 at 1. Detective Connors read N. Zakharyan his Miranda rights and presented him with a Miranda waiver form. Rough Hr'g Tr. at 29:4-16. N. Zakharyan stated that he understood his rights but did not sign the waiver form. Id. at 29:16-24. However, N. Zakharyan continued to answer questions. Id. at 30:3-7. He appeared calm and relaxed. Id. at 30:19-20. After reviewing N Zakharyan's telephone numbers, email addresses, and employment, Detective Connors mentioned the hookah pipe and large quantity of cigarettes found at his home. Id. at 31:9-22. Detective Connors asked N. Zakharyan why he had that many cigarettes, to which N. Zakharyan responded, "I smoke a lot." Id. at 31:21-24. N. Zakharyan's "demeanor quickly changed from relaxed to somewhat tense." ECF No. 209-8 at 3. When Detective Connors asked him where he got the cases of cigarettes, N. Zakharyan asked for an attorney, and the interview ended. Id; Rough Hr'g Tr. at 31:25-32:11. N. Zakharyan was not threatened or promised anything. Id. at 38:25-39:9.
Detective Connors did not offer N. Zakharyan anything to eat or drink during the interview, nor had N. Zakharyan been offered anything in the 10 to 15 minutes before Detective Connors arrived. Id. at 335:19-36:2.
Pursuant to his regular practice, Detective Connors did not complete the top portion of the form with N. Zakharyan's name, age, and date of birth. Id. at 36:6-14.
N. Zakharyan did not appear to be joking when he stated "I smoke a lot," but rather spoke in a clear, matter-of-fact manner. Id. at 38:20-24.
Because N. Zakharyan appeared to easily converse in Engligh, Detective Connors did not ask him whether he understood English Rough Hr'g Tr. at 32:16-21. When Detective Connors inquired about N. Zakharyan's education, he responded that he had attended various schools including Drexel College and Baltimore County Community College. Id. at 32:21-33:1.
B. Procedural History
On December 3, 2013, N. Zakharyan, and others, were indicted on one count of conspiracy to traffic in contraband cigarettes in violation of 18 U.S.C. § 371 and multiple counts of trafficking in contraband cigarettes in violation of 18 U.S.C. § 2342(a). ECF No. 1; see also supra note 7. On January 17, 2014, N. Zakharyan was arraigned and pled not guilty. ECF No. 94.
The original indictment charged N. Zakharyan with nine trafficking counts. ECF No. 1 at 13-14.
On December 19, 2014, N. Zakharyan moved to suppress statements and tangible and derivative evidence from the search of his home pursuant to a search warrant, ECF Nos. 155, 156. At the April 2, 2015 motions hearing, N. Zakharyan adopted A. Zakharyan's motion to dismiss the indictment because of outrageous government conduct. See Rough Hr'g Tr. at 25:17-21; ECF Nos. 163 (motion), 165 (memorandum in support of motion).
At the motions hearing, N. Zakharyan withdrew his motion for severance from co-defendants. Rough Hr'g Tr. at 25:6-8; ECF No. 157. As he is the only defendant going to trial, that motion will be denied as moot.
At the motions hearing, N. Zakharyan also orally adopted Y. Rakhamimov's motion to disclose CHS-1's identity and A. Zakharyan's reply thereto. Rough Hr'g Tr. at 25:9-12. However, on April 7, 2015, the parties informed the Court about their agreement to resolve that motion. Accordingly, the oral motion to disclose CHS-1's identity will be denied as moot.
On March 2, 2015, the government opposed N. Zakharyan's motions. See ECF No. 209 (consolidated motions response).
However, the government has not opposed the procedural aspects of the Defendants' motions to adopt co-defendant's motions.
On March 10, 2015, N. Zakharyan was charged in a superseding indictment that removed charges against co-defendants and increased the number of counts of trafficking in contraband cigarettes. ECF No. 214 at 12-13.
The superseding indictment charges N. Zakharyan with ten trafficking counts. ECF No. 214 at 12-13.
On April 2, 2015, N. Zakharyan was arraigned on the superseding indictment and pled not guilty to all counts. ECF No. 242. That day, a motions hearing was also held. ECF No. 243. Detective Connors testified about N. Zakharyan's custodial statement. Rough Hr'g Tr. at 26:10-39:11. The government submitted two exhibits: a blank "Miranda Rights Waiver Form 14," Gov. Hr'g Ex. 1, and a June 25, 2008 press release by the New York State Department of Taxation and Finance about an unrelated contraband cigarette trafficking operation, Gov. Hr'g Ex. 2. Later, the government supplemented its exhibits to include Attachment G-2 to the search warrant affidavit, which lists the items to be seized from N. Zakharyan's home. See ECF No. 249. II. Analysis
See also ECF No. 248 (exhibit list).
A. Motion to Dismiss the Indictment
N. Zakharyan argues that the government engaged in outrageous conduct when it induced medical billing fraud suspects to traffic in contraband cigarettes; the government thus allowed large quantities of low-cost cigarettes to enter the market without regard for public health. ECF Nos. 163, 165 at 10-23. The government argues that the contraband cigarette operation was reasonable and necessary to assess the scope of criminal conduct committed by the Yusufov family and their associates, and public health considerations are not appropriately considered "under the rubric of individual due process rights." ECF No. 209 at 27-31.
N. Zakharyan orally adopted this motion at the hearing. Rough Hr'g Tr. at 25:18-21. The arguments, however, are from Y. Rakhamimov's motion and supporting memorandum, ECF Nos. 163, 165.
Although the memorandum in support of this motion briefly discusses the entrapment defense, ECF No. 165 at 11 n.4, the motion is not based on entrapment, see ECF No. 232 at 1, which, as the government notes, is a defense not appropriately raised until trial, see ECF No. 209 at 18.
Although alluded to in Rochin v. California, 342 U.S. 165, 172 (1952), dismissal on the basis of outrageous government conduct originated in United States v. Russell, 411 U.S. 423 (1973). In Russell, the criminal defendant argued outrageous government conduct when an undercover agent supplied narcotics manufacturers with a legal, but difficult to obtain, chemical that was essential to manufacturing methamphetamine. Id. at 431. After rejecting the defendant's claim of entrapment, the Supreme Court also denied a Due Process claim, explaining:
[w]hile we may some day be presented with a situation in which the conduct of law enforcement agents is so outrageous that due process principles would absolutely bar the government from invoking judicial processes to obtain a conviction, . . . the instant case is distinctly not of that breed.
Id. at 421-32 (internal citation omitted). Application of this constitutional theory was limited in Hampton v. United States, 425 U.S. 484 (1976). In Hampton, a government informant allegedly sold heroin to the defendant, who later sold it to government agents. Although acknowledging that "the Government . . . played a more significant role in enabling petitioner to sell contraband in this case than it did in Russell," id. at 489, the Court rejected the defendant's claim that his due process rights had been violated, id. at 490, stating:
[i]f the result of the governmental activity is to implant in the mind of an innocent person the disposition to commit the alleged offense and induce its commission, the defendant is protected by the defense of entrapment. If the police engage in illegal activity in concert with a defendant beyond the scope of their duties the remedy lies, not in freeing the equally culpable defendant, but in prosecuting the police under the applicable provisions of state or federal law.
Id. at 490 (plurality opinion) (internal citation omitted). Citing Hampton, the Fourth Circuit has since held that the "outrageous conduct" doctrine "survives in theory, but is highly circumscribed." United States v. Hasan, 718 F.3d 338, 343 (4th Cir. 2013). To offend due process, government conduct must violate a protected right of the defendant, and "must be 'shocking,' or 'offensive to traditional notions of fundamental fairness.'" Id. at 342-43 (quoting United States v. Osborne, 935 F.2d 32, 37 (4th Cir. 1991)).
Indeed, the Fourth Circuit has never held, in a specific case, that the Government violated a defendant's rights through outrageous conduct. Hasan, 718 F.3d at 343.
In formulating the Fourth Circuit test, the Osborne court noted that federal appellate courts have demonstrated a "high shock threshold" in response to "extremely unsavory government conduct." 935 F.2d at 36. For example, Osborne cited with approval United States v. Simpson, 813 F.2d 1462 (9th Cir. 1987), wherein the Ninth Circuit affirmed the conviction on various drug charges of a defendant who had provided heroin in exchange for sexual favors from a woman who had been manipulated into her conduct by the FBI. See id.
The government likens the contraband cigarette operation here to the undercover operation approved in Hasan. ECF No. 27 at 62. In Hasan, as part of a long-term investigation into an alleged contraband cigarette trafficking ring, undercover agents sold almost 40,000 cartons of untaxed cigarettes to members of the conspiracy, including the defendant. 718 F.3d at 34 0. The cigarettes were bought from undercover agents in Virginia and transported to New York for sale. Id. The Fourth Circuit affirmed the defendant's conviction on grounds that Congress had authorized "commercial endeavors in the context of undercover investigations," and the "mere" sale of "untaxed cigarettes [did] not render [the] investigation outrageous." Id. at 344. N. Zakharyan distinguishes Hasan on the grounds that, here, the government "created the [contraband cigarette trafficking] ring out of whole cloth," and Hasan did not address public health concerns arising from the distribution of low-cost contraband cigarettes. ECF No. 165 at 10; see also Rough Hr'g Tr. at 41:1-17.
See Departments of State, Justice, and Commerce, the Judiciary and Related Agencies Appropriations Act of 1992, Pub. L. No. 102-395, § 102(b)(1)(B), (D) (authorizing the FBI to establish "business entities as part of an undercover investigative operation," and authorizing "proceeds from such undercover operation [to] be used to offset necessary and reasonable expenses incurred in such operation"), cited in Hasan, 718 F.3d at 344. The Fourth Circuit also rejected the defendant's argument that Congress, through the Contraband Cigarette Trafficking Act ("CCTA"), 18 U.S.C. § 2341, et seq., had impliedly prohibited government agents from distributing contraband cigarettes, because "unstamped cigarettes . . . in the possession of federal agents (in the course of their official duties) . . . are not 'contraband' as a matter of law." Id. at 344.
N. Zakharyan also distinguishes Hasan on the basis that the "argument made and rejected in Hasan was that the government did not have legal authority to distribute such a quantity of untaxed cigarettes." ECF No. 165 at 10; see also supra note 39. However, Hasan clearly addressed whether the operation itself was outrageous. See Hasan, 718 F.3d at 344 ("There is also no merit to Hasan's claim that [Alcohol, Tobacco, and Firearm] agents in this case otherwise engaged in behavior that is 'offensive to traditional notions of fundamental fairness.'").
Hasan did not explicitly rest on the prior existence of the contraband cigarette trafficking ring; instead, the Court focused on whether the supply of contraband was outrageous. Borrowing from its previous opinions, the Hasan court observed that:
'[o]utrageous is not a label properly applied to conduct because it is a sting or reverse sting operation involving contraband,' . . . 'Justice Powell's concurrence in Hampton recognized that the practicalities of law enforcement sometimes compel officers to provide supplies to drug manufacturing operations, or even to supply 'contraband itself,' and suggested that due process does not necessarily prohibit use of these and similar investigative techniques.'Hasan, 718 F.3d at 344 (quoting United States v. Goodwin, 854 F.2d 33, 37 (4th Cir. 1988); United States v. Milam, 817 F.2d 1113, 1116 (4th Cir. 1987))(internal citations omitted). Thus, it is far from certain that Hasan would have been resolved differently had undercover agents supplied contraband cigarettes to persons who had not previously trafficked in them.
Here, there was a reasonable basis for the FBI's investigation. In 2006 the BCPD and FBI began investigating Europe Restaurant for receiving stolen goods, distributing cocaine, and firearms possession. In 2009, the BCPD received information from two concerned citizens and CI #5631 that S. Yusufov--through Healthway Pharmacy--had sold illicit Russian drugs obtained from New York-based suppliers and committed healthcare fraud.
Further, after becoming acquainted with CHS-1, S. Yusufov expressed willingness to engage in criminal activity, telling CHS-1 they could make "extra money" from CHS-1's purported export activities or from engaging in "an easy fraud scheme" involving prescription drugs. When CHS-1 mentioned that he dealt in alcohol and cigarettes, S. Yusufov immediately offered to introduce him to a "connected" figure in Baltimore's Russian community. A few days later, S. Yusufov told CHS-1 that E. Rakhamimov had buyers for contraband cigarettes and alcohol and wanted to arrange a meeting between them the next day. Thereafter, S. Yusufov introduced CHS-1 to another prospective buyer. Thus, the undercover operation was not "an indiscriminate government fishing expedition" targeting innocent persons or those who lacked connections to a criminal network. A government informant presented a criminal opportunity to S. Yusufov (and his associates), which he not only accepted, but insisted on pursuing when faced with a delay. This circumstance is neither "shocking" nor "offensive to traditional notions of fundamental fairness." Osborne, 935 F.2d at 37 (internal quotation marks omitted).
Later, S. Yusufov had suggested a scheme involving bottled water and offered to introduce CHS-1 to a dealer of counterfeit or stolen watches.
United States v. Hunt, 749 F.2d 1078, 1087-88 (4th Cir. 1984)(affirming conviction of former North Carolina state judge on charges that included accepting bribes and racketeering when he had been pursued by an undercover FBI agent investigating judicial corruption).
Cf. United States v. Lard, 734 F.2d 1290, 1296-97 (8th Cir. 1984)(reversing conviction on entrapment grounds but noting that government conduct approached outrageousness meriting dismissal on due process grounds when "it was aimed at creating new crimes for the sake of bringing criminal charges against [the defendant], who, before being induced, was lawfully and peacefully minding his own affairs") (emphasis added); United States v. Twigg, 588 F.2d 373, 380-81 (3d Cir. 1978)(reversing conviction on due process grounds when the government found a location for a speed-manufacturing operation and provided almost all the supplies, including "the indispensable ingredient, phenyl-2-propanone," its informant led the operation and "furnished all of the laboratory expertise," and the defendants lacked the knowledge to manufacture the drugs without the informant and provided "minimal" assistance); United States v. Batres-Santolino, 521 F. Supp. 744, 750-51 (N.D. Cal. 1981) (reversing conviction when defendants were "obvious novices" who "had never imported cocaine before, and had no foreign source of supply of their own whatsoever"). In addition to Lard and Twigg, A. Zakharyan argues that this case is like Greene v. United States, 454 F.2d 783 (9th Cir. 1971)(reversing convictions for possession of unregistered distilling apparatus and sale without stamp of distilled spirits when the government involved itself in, and maintained, the operation). See ECF No. 165 at 12. Greene, however, has been impliedly overruled, see United States v. Haas, 141 F.3d 1181 (9th Cir. 1998) (Greene, "which may be an entrapment rather than an outrageous government conduct case [, . . . predates Russell and Hampton, so does not reflect the current law of the circuit on outrageous government conduct"), and did not apply the strict standard the Fourth Circuit applies to claims of outrageous government conduct.
Cf. Hunt, 749 F.2d at 1087-88 ("Nor are we presented with a situation where a defendant firmly refused a proposed payoff, and thereafter was incessantly hectored by government agents to reverse his decision.").
Cf. Patterson v. United States, No. 3:14-CV-00342-MOC, 2014 WL 6390994, at *2-3 (W.D.N.C. Nov. 17, 2014) adhered to on reconsideration, No. 3:14-CV-00342-MOC, 2014 WL 6769620 (W.D.N.C. Dec. 1, 2014)(defendant, who had "a history of violent criminal activity," was provided "with an opportunity to commit another violent criminal act").
The Court is not persuaded by N. Zakharyan's argument that public health considerations render the government's conduct outrageous. Although, as N. Zakharyan contends, the effect of an undercover operation on the public is a reasonable consideration, the test this Court must apply is whether the government conduct in question was "shocking" or "offensive to traditional notions of fundamental fairness." N. Zakharyan attempts to shock the Court's conscience by asserting that the contraband cigarettes supplied by the government caused almost 400 premature deaths. ECF No. 232 at 14. The Court is mindful of the risks of cigarette smoking; however, the highly attenuated connection between the undercover operation and the purportedly smoking-related deaths--and the lack of evidence thereof--do not convince the Court that the government conduct was sufficiently shocking as to bar prosecution. As noted above, courts have a "high shock threshold," and have upheld undercover operations involving "substantial quantities of government supplied contraband" when, as here, the investigation targeted distributors.
See ECF No. 232 at 9 (citing Hampton, 425 U.S. at 493 n.4 ("Governmental investigation involving participation in activities that result in injury to the rights of its citizens is a course that courts should be extremely reluctant to sanction.")(internal quotation marks and citation omitted)). N. Zakharyan also notes that, after the infamous "Fast and Furious" operation, the U.S. Department of Justice, Officer of the Inspector General ("OIG"), has required law enforcement to consider risks to public safety posed by an investigation and its maintenance. Id. Though sound, OIG's policy is not binding on this Court.
To calculate that figure, A. Zakharyan relies on the testimony of Thomas Frieden, M.D., the current Centers for Disease Control director, in City of New York v. Golden Feather Smoke Shop, Inc., No. 08-CV-3966(CBA), 2009 WL 2612345, at *24 (E.D.N.Y. Aug. 25, 2009). The plaintiffs in Golden Feather had sought injunctive relief barring the sale of untaxed cigarettes from the Poospatuck Indian Reservation in New York City. Dr. Frieden testified that the untaxed, low cost cigarettes prevented people from quitting smoking. Id. at *24. Had those cigarettes been fully taxed, according to Dr. Frieden, the decrease in consumption would have prevented hundreds of premature deaths. Id. Relying on Dr. Frieden's testimony, the Court held that the plaintiffs had established the irreparable harm necessary for injunctive relief. Id. at *41.
Osborne, 935 F.2d at 36.
See, e.g., United States v. Santana, 6 F.3d 1, 5 & n.1 (1st Cir. 1993)(reversing district court's dismissal of the indictment when the government supplied, and did not recover, 13.3 grams of heroin--equaling about 2,500 street doses--while targeting a network capable of distributing 200 kilograms of heroin per month).
Also, neither the volume of contraband cigarettes supplied by the government nor the duration of the operation is outrageous. The Fourth Circuit has previously declined to hold government conduct outrageous when "it has enough evidence to seek an indictment for some crime, [but] opts instead to wait in favor of continuing its investigation," and opined that "[d]ue process requires no such ruminations" about the government's motive for continuing the investigation. United States v. Jones, 18 F.3d 1145, 1155 (4th Cir. 1994)("[W]e find it not outrageous for the government to continue to purchase narcotics from willing sellers even after a level of narcotics relevant for sentencing purposes has been sold."). N. Zakharyan's oral motion to dismiss the indictment for outrageous government conduct will be denied.
B. Motions to Suppress
1. Search and Seizure
N. Zakharyan challenges the search of 5001 Hollington Drive. ECF No. 156. He argues that the agents' reliance on the search warrant was unreasonable, and that they exceeded the scope of the warrant when they seized items neither in plain view nor which would have inevitably been discovered. Id. at 1-2. The government argues that the search warrants were supported by probable cause, and that--even if probable cause was lacking--the agents relied on the warrants in good faith. ECF No. 209 at 52-57.
The Fourth Amendment prohibits unreasonable searches and seizures, and no warrant may issue without probable cause. U.S. Const, amend. IV. There is probable cause for a search when there is a "fair probability that contraband or evidence of a crime will be found in a particular place." Gates, 462 U.S. at 238. Probable cause does "not require officials to possess an airtight case before taking action," and officers "must be given leeway to draw reasonable conclusions" from information. Taylor v. Farmer, 13 F.3d 117, 121-22 (4th Cir. 1993).
In reviewing the probable cause determination, "[the Court] accord[s] great deference to the issuing judge's assessment of the facts presented." United States v. Allen, 631 F.3d 164, 173 (4th Cir. 2011). "[T]he task of a reviewing court is not to conduct a de novo determination of probable cause, but only to determine whether there is substantial evidence in the record supporting the [judge's] decision to issue the warrant." Massachusetts v. Upton, 466 U.S. 727, 728 (1984). In addition to the probable cause requirement, a valid warrant must be issued by a "neutral and detached magistrate" and must state with particularity the place to be searched and the items or person to be seized. See U.S. Const. amend IV; United States v. U.S. Dist. of Mich., 407 U.S. 297, 316 (1972).
Under the "good faith" exception, when officers rely on a facially valid warrant and the supporting affidavit is later found to lack probable cause, the evidence seized is not subject to the exclusionary rule and is admissible in the government's case in chief. United States v. Leon, 468 U.S. 897, 913 (1984). The evidence will be suppressed only if (1) the issuing judge was misled by information that the affiant knew or should have known was false, (2) the judge "wholly abandoned" his or her neutral role, (3) the affidavit was "so lacking in indicia of probable cause as to render official belief in its existence entirely unreasonable," or (4) the warrant is so facially deficient that no reasonable officer could presume it to be valid. Id. at 923.
The sealed affidavit in support of the search warrants provides a detailed description of the operation before stating the affiant's basis for believing that contraband or evidence of a crime would be found at each location to be searched. See ECF No. 209-5 at 7-25, 65-69. The affidavit states that N. Zakharyan had been present during deliveries of the contraband cigarettes and had been observed concealing and loading the cigarettes for transportation to New York. Id. at 65. Telephone calls between E. Rakhamimov, I. Rakhamimov, and A. Zakharyan suggested that N. Zakharyan had prepared lists of recently delivered cigarettes, and stored some of the cigarettes at his home. N. Zakharyan operates a business, "Moon Rock LLC," which, according to its articles of incorporation, "serve[s] and sell[s] tobacco products." Id. at 65. According to Maryland real property records, N. Zakharyan co-owns 5001 Hollington Drive, Unit 105. Id. at 69. Throughout the investigation, N. Zakharyan had been observed coming and going from an attached garage with direct access to Unit 105. Id.
In one of those calls, a person named "Kolya," whom the affiant believed referred to N. Zakharyan and who was with E. Rakhamimov, was told to "[w]rite [the list] on paper, take a picture, and send" it to I. Rakhamimov. ECF No. 209-5 at 66. In another call, A. Zakharyan told E. Rakhamimov that he needed to take a truck to "Kolya's" house; the next day, I. Rakhamimov mentioned that "[t]here's still some at Kolya's"--apparently in reference to the cigarettes--to which E. Rakhamimov responded, "I loaded them up, brought them . . . there were only six boxes, I think." Id. at 67-68.
The search warrant authorized the seizure of contraband cigarettes, various records and documents, U.S. currency, safes and strong boxes, indicia of occupancy, cellular telephones, computers, and data security devices. ECF No. 249.
The physical surveillance and intercepted communications in the affidavit thus establish a nexus between N. Zakharyan and the contraband cigarette operation, and between the operation and his home. There is "substantial evidence in the record" supporting the judge's decision to issue a search warrant for 5001 Hollington Drive. See Upton, 466 U.S. at 728; Lalor, 996 F.2d at 1583. For that reason, the warrant is not "so lacking in indicia of probable cause as to render official belief in its existence entirely unreasonable" under Leon, 468 U.S. at 923.
Further, a warrant is facially valid, if "[it] was based on probable cause and supported by a sworn affidavit, and it described particularly the place of the search" and the items to be seized. See Groh v. Ramirez, 540 U.S. 551, 557 (2004). The warrant in this case meets those requirements. See ECF Nos. 209-5; 249. There is no evidence that the issuing judge "abandoned" his or her neutral role in signing the warrant, or that the judge was "misled" by false information. Thus, N. Zakharyan is not entitled to suppression under any of the Leon exceptions. His motion to suppress evidence from the search of his home will be denied.
N. Zakharyan also contends that officers exceeded the scope of the warrant and seized items that were not in plain view, and which would not have been inevitably discovered. ECF No. 155 at 2. N. Zakharyan has not stated what those items were or attached supporting exhibits. Accordingly, his argument must fail.
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2. Statements
N. Zakharyan argues that any statements he made to law enforcement were obtained in violation of the privilege against self-incrimination and his Miranda rights. ECF No. 155.
Miranda v. Arizona, 384 U.S. 436 (1966), requires that the police inform the suspect that he has the right to remain silent and the right to the presence of an attorney before any "custodial interrogation." See Miranda, 384 U.S. at 479. When a suspect in custody has invoked his right to counsel, he "is not subject to further interrogation by the authorities until counsel has been made available to him, unless the accused himself initiates further communication, exchanges, or conversations with the police." Edwards v. Arizona, 451 U.S. 477, 484-85 (1981).
A waiver of Miranda rights must be voluntary, knowing and intelligent--though it need not be in writing. Moran v. Burbine, 475 U.S. 412, 421 (1986); Berghuis v. Thompkins, 560 U.S. 370, 385 (2010) (finding waiver when the defendant declined to sign the waiver form but understood the rights he gave up by speaking to law enforcement). A waiver is voluntary, knowing, and intelligent if it was "the product of a free and deliberate choice rather than intimidation, coercion, or deception," and if it was "made with a full awareness of both the nature of the right being abandoned and the consequences of the decision to abandon it." Id.; see also United States v. Cristobal, 293 F.3d 134, 139-40 (4th Cir. 2002). The Court engages "in the same inquiry when analyzing the voluntariness of a Miranda waiver as when analyzing the voluntariness of statements under the Due Process Clause," Cristobal, 293 F.3d at 140, that is, the Court asks whether "the defendant's will has been overborne or his capacity for self-determination critically impaired because of coercive police conduct." Id.
The unrebutted evidence shows that N. Zakharyan understood his Miranda rights and waived them by submitting to questioning, was not coerced by Detective Connors or Agent Bradley, and the interview ended when he invoked his right to counsel. Thus, his motion to suppress statements will be denied. III. Conclusion
For the reasons stated above, N. Zakharyan's motion to adopt pertinent co-defendant motions will be granted; all other motions will be denied. 4/9/15
Date
/s/_________
William D. Quarles, Jr.
United States District Judge