United States v. Joseph Nagle
2015 U.S. App. LEXIS 17187
| 3rd Cir. | 2015Background
- Joseph Nagle and Ernest Fink, executives/owners of SPI and CDS, used Marikina (a certified DBE owned by Cruz) to bid on PennDOT/SEPTA DBE subcontracts while SPI/CDS performed the work and kept most profits. Marikina received over $135 million in contracts during the relevant periods.
- FBI agents executed search warrants at SPI/CDS offices in October 2007, imaged eleven employee computers and a shared server; Nagle’s home computer had been taken home and was not seized.
- A federal indictment charged Nagle and Fink with conspiracy, wire/mail fraud, and money-transaction offenses; Cruz and two executives pleaded guilty and cooperated.
- Nagle moved to suppress the imaged electronic evidence; the District Court denied suppression for lack of a personal Fourth Amendment privacy interest. Nagle was later convicted at trial; Fink pleaded guilty.
- At sentencing the District Court adopted a loss calculation equating loss to the face value of the diverted DBE contracts (no credit for performance), producing large Guidelines increases; both defendants received downward departures but the court vacated both sentences and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Standing/expectation of privacy to challenge corporate search and seizure of computers/server | Nagle: as majority owner and CEO, he has a privacy interest in corporate premises and files and may challenge the search | Government: corporate entities have rights but Nagle lacked a personal expectation of privacy in employees’ computers or in corporate server files he did not personally control or secure | Court: shareholder/executive may challenge only by showing a personal connection and efforts to keep things private; Nagle failed to show such a personal expectation for seized items, so suppression denial affirmed |
| 2) Proper loss measure under U.S.S.G. § 2B1.1 for DBE-fraud (Note 3(A) vs Note 3(F)(ii)) | Defendants: loss should be zero or at least reduced by value of services performed (profit or fair market value); Note 3(A) (actual loss) should govern | Government: treat DBE program as government benefit and use Note 3(F)(ii) so loss equals full contract value diverted to unintended recipient | Court: regardless of which note applies, loss = face value of contracts minus fair market value of services rendered (i.e., credit for materials/labor); therefore district court’s full-face-value approach without credit was incorrect |
| 3) Harmlessness of Guidelines miscalculation | Government: sentencing departures effectively produced results similar to defendants’ requested loss figures, so error was harmless | Defendants: miscalculation materially affected Guidelines and sentences | Court: error was not clearly harmless (district court relied on incorrect loss in sentencing), so sentences vacated and remanded |
Key Cases Cited
- Rakas v. Illinois, 439 U.S. 128 (Sup. Ct. 1978) (Fourth Amendment rights are personal and cannot be vicariously asserted)
- United States v. SDI Future Health, Inc., 568 F.3d 684 (9th Cir. 2009) (shareholders need a personal connection and protective steps to claim corporate-search privacy)
- United States v. Mohney, 949 F.2d 1397 (6th Cir. 1991) (sole owner lacked expectation of privacy in ordinary corporate records not personally prepared or seized from common areas)
- United States v. Gonzalez, Inc., 412 F.3d 1102 (9th Cir. 2005) (owners of premises have standing to challenge wiretaps when they directly own the property and take steps to keep conversations private)
- United States v. Dickler, 64 F.3d 818 (3d Cir. 1995) (in fraud, victim’s loss is normally difference between value given and value received)
- United States v. Nathan, 188 F.3d 190 (3d Cir. 1999) (in procurement fraud, offset contract price by actual value of components/services provided)