Probable Cause – Probable cause in wiretap affidavit was not stale where recorded conversations showed defendant was using the phone line in question to discuss completed crime in the month before the affidavit and where additional circumstantial evidence suggested that conspiracy was ongoing.
Wiretap Necessity – The Government’s possession of evidence that was arguably sufficient to convict the defendants does not defeat necessity where the stated goal of the wiretap is to discover the full scope of the conspiracy and identities of all co-conspirators.
In connection with two market manipulation schemes, William Goldstein and Marc Bercoon were convicted by a jury of two counts of conspiracy, two counts of mail fraud, seven counts of wire fraud, and one count of securities fraud. Their resulting sentence included a $1.9 million forfeiture order.
On appeal, Goldstein and Bercoon both argued that the district court had committed reversible errors in its denial of both their motion to suppress wiretap evidence and their motion for a hearing under Franks v. Delaware. Both defendants also argued for reversal on the basis of a material variance between the indictment and the evidence that was actually presented at trial. Golstein further raised two claims for reversal individually, and Bercoon raised one additional claim as well. The Eleventh Circuit rejected all claims by both defendants and affirmed both the convictions and the sentences of the district court.
At trial, the Government entered seventeen wiretap recordings into evidence. In the first place, Goldstein and Bercoon argued that these recordings should have been suppressed because the affidavit for the wiretap warrant had lacked fresh probable cause. After a de novo review, the Court disagreed, finding that the probable cause in the affidavit was not stale under the totality of the circumstances. In a recorded conversation from one month prior, Bercoon had implicitly acknowledged some criminal actions in the scheme from the year before. This was sufficient to give the lower court probable cause to believe the wiretap would uncover evidence of the completed crime. Further, there was also a new market manipulation that began three months prior to the affidavit, and a high volume of calls between the suspected co-conspirators provided circumstantial evidence that the conspiracy itself was ongoing.
Secondly, Goldstein and Bercoon argued that the affidavit failed to satisfy the necessity requirement for a wiretap application because the information the government obtained from the SEC should have been sufficient to convict them. The circuit court reviewed the lower court’s decision to reject this claim and found no clear error. Necessity is not defeated by the possibility that the Government already has enough evidence to convict the defendants of a crime. Here the Government sought to identify the full scope of the conspiracy and the identities of all co-conspirators, and its affidavit “exhaustively described” a wide variety of other techniques and tools that had previously failed to accomplish this goal.
The Court also found that even had the affidavit failed to show necessity or contained only stale probable cause, the fruits of the wiretap still need not have been suppressed because the good-faith exception to the exclusionary rule would apply. None of the four traditional exceptions to the good-faith rule apply in this case.
The final argument Goldstein and Bercoon made for the suppression of the wiretap evidence was that they were improperly denied a Franks hearing by the lower court. Reviewing this denial for an abuse of discretion, the Eleventh Circuit found that the defendants were not entitled to a Franks hearing because they failed to make a “substantial preliminary showing” that statements in the affidavit were deliberately false or made with reckless disregard for the truth or that those statements were necessary to the magistrate’s finding of probable cause. Information gleaned from a related pending civil investigation would not have negated the necessity showing, and information that Goldstein and Bercoon divested themselves of their interest in the relevant company early in the conspiracy did not negate probable cause since the mechanism of their market manipulation was to manipulate stocks that were in other people’s names.
After de novo review of their variance claim, the Court found that there was no material variance between the indictment and the evidence shown at trial and that, even if there had been, Goldstein and Bercoon would have suffered no substantial prejudice as a result of it. Variance is only fatal when evidence at trial proves different facts than the ones in the indictment, not merely when additional facts are shown that are consistent. The additional facts mentioned by the defendants were within the scope of the fraud allegations of the indictment. Those facts also appeared in offering documents mentioned by the indictment, and thus Goldstein and Bercoon could not have been “unfairly surprised” by them so as to have caused prejudice.
Defendants raised additional, less meritorious arguments, including: improper merger of their criminal investigation with the civil SEC investigation, involuntariness of Goldstein’s statements to the SEC, inappropriate joint-and-several liability in the forfeiture portion of their sentence, and prosecutorial misconduct in both the grand jury proceedings and the closing arguments. In its opinion, the Court briefly addressed each of these claims and denied them all.
Appeal from the Northern District of Georgia
Opinion by J. Carnes, joined by Wilson and Branch
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