Briefly Noted: FBI Misled Magistrate To Get Incredibly Broad Seizure Warrant

Many readers will have seen accounts of this story, maybe even read some articles. I’ve been busy with other things but got around to reading the LATimes article, which is long and quite detailed. The article is well written—no glaring errors in explaining what is, for most people, including lawyers, a somewhat arcane area of the law—and it’s also eye opening:

FBI misled judge who signed warrant for Beverly Hills seizure of $86 million in cash

I have a personal interest in this story because for 2 years in the mid 1990s I worked civil forfeiture matters, writing affidavits for seizure warrants, etc.

I won’t attempt to summarize the article except very briefly. To understand what happened you need to know that, as I just stated, forfeiture—while it typically goes hand in hand with a criminal case, as here—is a civil procedure. There is no trial regarding the seizure of the assets. The warrant issues, usually from a magistrate judge, based on probable cause—51% probability. Not proof beyond a reasonable doubt. There is no trial, and the warrant issues based on an ex parte hearing. The seizure can be challenged, of course, but it’s tough because the standard is pretty low for a final decision like this. What I mean is, by comparison, in a criminal case an arrest warrant or indictment can also issue upon probable cause, but a conviction requires the much higher standard of proof beyond a reasonable doubt or a guilty plea. The standard in civil forfeiture never gets beyond the level of probable cause.

In this case it seems clear that the FBI had a good criminal case against the operators of the business. They legitimately had probable cause to believe that a commercial storage business was engaged in drug related money laundering in collusion with a precious metals store. However …

The seizure warrant that is being challenged in a class action suit permitted the FBI to take possession of all the storage boxes at the business. Not just boxes that were specifically linked to criminal activity. The FBI’s theory was that

it would be "irrational" for anyone who wasn't a lawbreaker to entrust the store with assets that a bank could better safeguard.

"Only those who wish to hide their wealth from the DEA, IRS, or creditors would" rent a box anonymously at U.S. Private Vaults

Perhaps that’s a not unreasonable surmise, but it certainly doesn’t seem to rise to the level of probable cause. As a result, the FBI seized all 700 boxes at the site.

The misleading came in this form. The magistrate judge, perhaps unwisely, trusted the FBI to tell him their intentions and follow his instructions. He understood—based on his own written instructions—that there was a potential for abusing the rights of these people. The magistrate judge assumed that the FBI would simply inventory the contents of the boxes as a basic custody security measure. What the FBI didn’t tell him was that they had decided that any cash over $5,000 in a box would be considered evidence of criminal activity. That means that it would lead to criminal investigation of the owner and that the contents would not be returned to the owner unless so ordered by a court.

In all, the FBI ultimately returned at least some of the contents of about 430 of the 700 boxes, according to the government.

Many box holders have agreed to give up a portion of their cash and property after deciding it was not worth spending tens of thousands of dollars in legal fees — or more — to recover the rest.

Some of those, and many others, have faced baseless FBI accusations of criminal wrongdoing. In May 2021, the FBI claimed the contents of 369 boxes — including the $86 million in cash — were linked to crime and filed papers for confiscation through forfeiture.

It went on to return everything in about 180 of those boxes after failing to produce evidence to support the allegations, court documents show. Those box holders retrieved more than $27 million. Attorneys for other customers say they recovered close to $25 million more through private negotiations with the U.S. attorney’s office.

Did I say that this article was eye opening?

What makes all of this really dodgy is that the FBI agent who wrote the affidavit—or much of it—and who is a former lawyer, admitted in the affidavit that she knew that not all, perhaps not even most, of the customers were criminals of any sort:

Of all the box holders, Zellhart mentioned only nine, [out of 700] either identifying them by their initials or not at all. She said they were "linked" or "associated" with law enforcement investigations, but again provided no facts specifying criminal misconduct.

While the majority of customers seemed to be drug dealers, she wrote, U.S. Private Vaults tried "to attract a non-criminal clientele as well, so as not to be too obvious a haven for criminals.”

At Zellhart’s deposition, Frommer asked, “Was it your opinion that most of the people who rented safe-deposit boxes were criminals in some way?”

“I was expecting a lot of criminals," she said. "I don't know about most.”

Frommer reminded her of the language in her affidavit.

“I don't sort of know how to answer your question as to whether it was all of them, it was most of them," she responded. "I don't — I don't have a percentage.”

Yikes!

Now, bear in mind that the US Attorney’s office in LA had the final decision on going ahead with this. It’s not just the FBI. Every USA office has lots of attorneys working on civil matters, including civil forfeiture. They would have reviewed all of this and would have presented the application to the magistrate judge. They also were involved in all legal proceedings that followed from the seizures.

Lots more at the link.