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United States v. Hansen

United States District Court, D. Idaho

July 16, 2019

UNITED STATES OF AMERICA Plaintiff,
v.
DAVID HANSEN Defendant.

          MEMORANDUM DECISION AND ORDER

          David C. Nye Chief U.S. District Court Judge

         I. INTRODUCTION

         Pending before the Court is Defendant David Hansen's Motion for an Evidentiary Hearing and to Suppress. Dkt. 36. In his Motion, Hansen moves for two things: (1) a Franks hearing to challenge the veracity of the warrant affidavit, and (2) the suppression of evidence seized. After reviewing the briefing and the record, the Court finds that a Franks hearing is unwarranted, so the Motion is DENIED in PART as it relates to the Franks hearing. The remainder of the Motion remains under consideration, and the Court will set a hearing on the suppression issues in due course. However, that hearing will not be a Franks hearing and thus may not include any challenge to the veracity of the affidavit.

         II. BACKGROUND

         Yellowstone Partners, LLC, (“Yellowstone”) is an investment advisory firm located in Idaho Falls, Idaho. On November 9, 2016, the Government executed a warrant to search Yellowstone's premises. Dkt. 36-1, at 9. At that time, David Hansen was the owner and Chief Executive Officer of Yellowstone.[1]

         The search warrant in this case was predicated on the affidavit (Dkt. 36-2) of FBI Special Agent Drew McCandless (“Special Agent McCandless”). Hansen argues that Special Agent McCandless misstated or omitted material facts in the affidavit and that without those errors, the Court would not have found probable cause for the search warrant. Given these alleged falsities, he asks for a Franks hearing, pursuant to Franks v. Delaware, 438 U.S. 154 (1978).

         III. LEGAL STANDARD

         At a Franks hearing, a defendant may challenge the veracity of the warrant affidavit. Franks, 438 U.S. at 155-56. In Franks, the Supreme Court held that the Fourth Amendment requires an evidentiary hearing if “the defendant makes a substantial preliminary showing that a false statement knowingly and intentionally, or with reckless disregard for the truth, was included by the affiant in the warrant affidavit, and if the allegedly false statement is necessary to the finding of probable cause.” Id. “Allegations of negligence or innocent mistake are insufficient.” Id. at 171. Conclusory “allegations of deliberate falsehood or of reckless disregard for the truth” are also not enough; rather, the allegations of deliberateness or recklessness “must be accompanied by an offer of proof.” Id. at 171. In order to obtain a Franks hearing, the defendant's motion must meet five requirements:

;(1) [T]he defendant must allege specifically which portions of the warrant affidavit are claimed to be false; (2) the defendant must contend that the false statements or omissions were deliberately or recklessly made; (3) a detailed offer of proof, including affidavits, must accompany the allegations, (4) the veracity of only the affiant must be challenged; and (5) the challenged statements must be necessary to find probable cause.”

United States v. Dicesare, 765 F.2d 890, 894-95 (9th Cir. 1985).

         Affidavits are presumed valid. Accordingly, the burden of showing otherwise is high. Franks, 438 U.S. at 171. The Supreme Court requires a substantial showing from the defendant, in part, because “if such hearings were conducted routinely . . ., they would be misused by defendants as a convenient source of discovery.” Id. at 167.

         Even if the defendant makes a substantial showing “that a false statement knowingly and intentionally, or with reckless disregard for the truth, was included [in the affidavit], ” a hearing still may not be required. Id. at 155, 171-72. “[I]f, when material that is the subject of the alleged falsity or reckless disregard is set to one side, there remains sufficient content in the warrant affidavit to support a finding of probable cause, no hearing is required.” Id. at 171-72.

         Probable cause for a search warrant exists where “there is a fair probability that contraband or evidence of a crime will be found in a particular place.” Illinois v. Gates, 462 U.S. 213, 238 (1983). The probable-cause showing is different for search warrants than for arrest warrants:

;[W]hile an arrest warrant and a search warrant both serve to subject the probable-cause determination of the police to judicial review, the interests protected by the two warrants differ. An arrest warrant is issued by a magistrate upon a showing that probable cause exists to believe that the subject of the warrant has committed an offense and thus the warrant primarily serves to protect an individual from an unreasonable seizure. A search warrant, in contrast, is issued upon a showing of probable cause to believe that the legitimate object of a search is located in particular place, and therefore safeguards an individual's interest in the privacy of his home and possessions against the unjustified intrusion of the police.

Steagald v. United States, 451 U.S. 204, 212-13 (1981).

         IV. ANALYSIS

         Upon thorough review, the Court finds that Hansen has not substantially shown that Special Agent McCandless intentionally or recklessly included false statements in the affidavit. Furthermore, had the alleged misstatements and omissions been corrected as Hansen proposed, probable cause for the search would still exist. For those reasons, the Court DENIES Hansen's request for a Franks hearing.

         A. Intentional or Reckless False Statements

         Paragraphs 7 through 43 of the affidavit provide the basis for a probable cause determination. Dkt. 36-2, at 5-12. Hansen challenges 20 of those paragraphs. See Dkt. 36-1, at 15-34. For clarity, the Court has categorized the challenges as follows: (1) Paragraph 21; (2) trivial mischaracterizations; (3) omissions of Cameron High's role; (4) omission of information discrediting Michael Dustin; (5) inclusion of information protected by attorney-client protection; and (6) omission of excuses given to the SEC. For each challenge, Hansen fails to meet his burden to substantially show that a false statement was intentionally or recklessly included in the affidavit.

         1. Paragraph 21

         The only falsity Hansen alleges is in Paragraph 21.[2] That paragraph outlines:

;COO suggested to Hansen that operations should take over the billing of fees, and the compliance department should then review the billing. Hansen refused to give up responsibility of the fee billing, telling COO that the SEC preferred ...

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