In re Search of Harmony Gold USA Inc
2:06-cv-07663
| C.D. Cal. | Aug 25, 2020Background
- In November 2006, at the request of Italian prosecutor Fabio De Pasquale under an MLAT, FBI agents executed search warrants at Frank Agrama’s home and Harmony Gold USA, seizing roughly 100 boxes; De Pasquale and members of his team were present during the searches.
- Movants (Agrama and Harmony Gold) moved for return of unlawfully seized property, alleging defective affidavits, warrant-protocol violations, and seizure of privileged materials.
- The government withdrew its opposition, acknowledged agents failed to follow certain protocols (including exposure of privileged materials), withdrew De Pasquale’s declaration, agreed to return all seized materials and not to transmit them to Italy, and the court entered the 2007 Order directing return and forbidding transmission.
- Years later, the IRS investigated Agrama family tax matters after they entered (and were later removed from) the voluntary disclosure program; the IRS informed counsel it had received information from a 2013 report by Gabriela Chersicla, who had been on De Pasquale’s team present at the 2006 search.
- Movants sought enforcement of the 2007 Order, asking the court to bar the IRS from relying on any information from De Pasquale or his team (including Chersicla) and to exclude the Chersicla report as a remedy for the 2006 constitutional violations.
- The court denied the motion, concluding the 2007 Order was limited to return of seized property (and non-transmission), did not effect a perpetual, across-the-board bar on government reliance on information, and that exclusion/suppression claims were unripe absent a concrete proceeding in which the government seeks to use the information.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of 2007 Order — does it bar IRS (or any agency) from relying on De Pasquale/team information for any purpose and forever? | The 2007 Order (and govt representations) meant the government would never rely on De Pasquale or his team or any information they obtained. | The government’s withdrawal of reliance related to its response in this litigation and the return of seized property; the Order required return and non-transmission, not a perpetual ban on agency use of information. | Court rejects Movants’ broad reading; Order limited to return/non-transmission of seized material and did not preclude agencies from considering information obtained by other means. |
| Whether the court can enjoin the IRS from using Chersicla-derived information or exclude the Chersicla report as remedy for the 2006 search. | Seeks exclusion and a judicial order forbidding IRS reliance on Chersicla report as remedy for constitutional violations. | Court/Defendant: district court cannot prescribe what an agency may consider in an investigation; suppression/exclusion is premature absent a concrete use of the evidence. | Court denied request as unripe and beyond its authority at this stage; suppression/remedy may be addressed later if government seeks to use the information. |
| Whether the government violated the 2007 Order by allowing Chersicla or others to rely on unlawfully obtained materials or by transmitting information to Italy or the IRS. | Argues the government permitted Chersicla to use information from the unlawful search, and IRS possession/use violates the Order. | Government points to compliance with return order, withdrawal of De Pasquale declaration, and that IRS had other sources and information predating or independent of Chersicla’s report. | Court found Movants did not show a violation of the 2007 Order and denied enforcement relief. |
Key Cases Cited
- G. M. Leasing Corp. v. United States, 429 U.S. 338 (1977) (suppression issue premature until government seeks to use the documents or information)
- Mitchell v. Riddell, 402 F.2d 842 (9th Cir. 1968) (no actual controversy for declaratory relief absent concrete IRS assessment or collection action)
- Swartz v. KPMG, LLC, 401 F. Supp. 2d 1146 (W.D. Wash. 2004) (declaratory relief or suppression not ripe where assessment/penalty remains speculative)
- Swartz v. KPMG LLP, 476 F.3d 756 (9th Cir. 2007) (appellate decision addressing aspects of the district court’s ruling)