United States v. Raymond David Young

[PUBLISH] IN THE UNITED STATES COURT OF APPEALS FILED FOR TH E ELEV ENTH C IRCUIT U.S. COURT OF APPEALS ________________________ ELEVENTH CIRCUIT November 18, 2003 No. 01-16118 THOMAS K. KAHN ________________________ CLERK D. C. Docket No. 92-00083-CR-FTM-29 UNI TED STA TES OF A MER ICA, Plaintiff- Appe llee, versus RAY MOND D AVI D YO UNG , Defen dant-A ppellant. ________________________ Appeal from the United States District Court for the Middle District of Florida _________________________ (November 18, 2003) Before BLACK and FAY, Circuit Judges, and HUCK *, District Judge. FAY, Circuit Judge: * Honorable Paul C. Huck, United States District Judge for the Southern District of Florida, sitting by designation. Defendant Raymond D. Young (“Young”), who has been convicted of 18 counts of conspiring to impede and impair the IRS in the computation and collection of diesel motor fuel excise taxes, subscribing to false quarterly excise tax return s, makin g false state ments to an IRS agent an d using false doc uments in connection with the review by an IRS agent of a 637 tax free certificate, raises eight cha llenges to his conv iction and subseq uent sen tencing. I ncluded among his various challeng es, You ng con tends tha t the district c ourt erre d in den ying his motion to suppress evidence o btained by the IRS w hen it conducted a warran tless search of F ederal Exp ress package s addressed to him. We a ffirm Yo ung’s conviction and sentence in all respects, and specifically find that, when Young and his co-defendants elected to ship the ill-gotten proceeds of their tax fraud scheme through Federal Express despite explicit warnings on the airbill and envelopes that (1) sending cash was illegal, and (2) Federal Express retained the right to inspect any pack age for a ny reaso n, defen dants ha d no leg itimate exp ectation o f privacy in the contents of the packages. I. IRS regulations regarding federal excise taxes deem the sale of gasoline and diesel fuel for “on-road” use to be taxable. Sales of these fuels for “off-road” and marine use are not taxable. Businesses that are eligible to buy fuel tax-free, such 2 as marinas, wholesale distributors and refineries, must first obtain a “637 certificate” f rom the IRS. In Ap ril 1989 , Youn g applied for a 63 7 certificate and ind icated on his application that his business, Dry Tortugas Marina (“DTM”), was a marine retailer headquartered in Marco Island, Florida, that would engage in the business of buying and selling fuel. Young also stated to an IRS agent around this time that he owned an oceangoing vessel that he would use to fuel fishing boats on the high seas. Th e IRS g ranted D TM a 637 cer tificate in S eptemb er 1989 . As it turn ed out, Young never planned on using his vessel for the stated purpose. Indeed, four month s prior to obtainin g his certif icate, Yo ung so ld the ves sel. Young proceeded to use the 637 certificate to purchase fuel tax-free from wholesalers, and resold the fuel – generally in cash-only transactions – to various retailers (such as truck stops, grocery stores and service stations) and trucking compa nies. As these sales were all f or “on-r oad” us es, all wer e taxable p ursuan t to IRS re gulation s. Not su rprising ly, DTM did not p rovide in voices to its cash sale customers, and all records regarding these sales were destroyed. On DTM’s 1990 form 720s – which businesses selling fuel are required to submit quarterly – Young claimed th at DTM owed no fede ral excise ta xes for f uel purc hases an d sales. As Young’s scheme involved large and frequent cash transactions, DTM 3 employees in Texas would send the cash proceeds to Young in Florida via Federal Expre ss two to three time s per mo nth. In late 1990, I RS A gent Ru ka was alerted to these larg e cash sh ipments and beg an a prelim inary inv estigation to determ ine if enough information existed to conduct a criminal investigation. Suspecting a scheme to launder narcotics proceeds through the sale of diesel fuel, Agent Ruka brought in IRS Agent Sutherland, who had expertise in this line of business. Agent Suther land imm ediately no ticed that D TM w as due fo r its two- year revie w of its 637 certificate, and began a civil investigation in that regard. In preparation for the review, Young employed a customs house broker to prepare invoices and bills of lading for all of the cash sales. DTM employees also contacted its various fuel customers and induced them to sign certificates falsely stating that they were using fuel for tax exempt purposes. It was during his first review meeting with Agent Sutherland, on April 30, 1991, that Young made overtures to Sutherland to lead the agent to believe he was being offered a bribe. As a result, IRS Inspections Service (a branch of the IRS that conducts internal affairs investigations) asked Sutherland to wear a wire during the subsequent meeting between the two, on May 31, 1991, which he agreed to do. During the second meeting, Young p resented Sutherland with the new ly- minted in voices, w hich the a gent imm ediately fo und to b e suspicio us as all 4 appeared to be identical despite the fact that they spanned transactions over a two- year period. At the third and final meeting between Young and Agent Sutherland, Suther land info rmed Y oung th at the IRS was rev oking h is 637 re gistration until his marine f ueling b usiness w as in ope ration. In the meantime, Agent Ruka continued his investigation of Young. As part of this investigation, Agent Ruka contacted Federal Express operations manager Joseph Oldock and asked if Federal Express would permit IRS agents and U.S. Custom s to view packag es bearin g You ng’s and co-defe ndant A hmed’s names. After co ntacting h is local safe ty and leg al departm ents, Old ock agr eed to co operate with the IRS. Without a search warrant, Federal Express turned over, and the IRS x-rayed, several of the packages. Fourteen packages were x-rayed by the IRS and found to contain large am ounts o f curren cy. Thes e results w ere then u sed to ob tain four search warrants in Florida and Louisiana, which were used to open two of the currenc y-laden p ackages and to se arch Y oung’s place of r esidence and bu siness in Marco Island. During the trial, co-defendants Thomas Roettele and Mohammed A hmed moved to suppress evidence obtained when the IRS intercepted and x-rayed the Federal Expess packages. The district court denied the motion, finding that the defendants could not have a reasonable expectation of privacy concerning the 5 contents of the packages. Recogn izing that a container, such as a Federal Express package, may not norm ally be searched without a warran t, the court nevertheless held that warnings on Federal Express packaging that shipping cash was prohibited, together with a notice on the airbill that the company retained the right to inspec t packag es, rende red unr easonab le any exp ectation o f privacy defend ants had in the packages. Although Young raises various issues on appeal, we believe that the denial of this motion to suppress is the only issue that merits discussion. II. Though defen dants Ahmed an d Roettele moved the district court to suppress evidence on the grounds that the search of the Federal Express packages by IRS agents violated their Fourth Amendment rights, Young never asserted this theory in his own motion to suppress. Accordingly, we review the district court’s ruling for plain error. United States v. Sentovich, 677 F.2d 834, 837 (11th Cir. 1982). III. The district court found comp elling the testimony of Federal Express employ ee Josep h Oldo ck, in w hich he e xplained that the F ederal E xpress a irbill, which was utilized by defend ants in shipping each of the fourteen pac kages, identified in its terms and conditions on the reverse that Federal Express may open and insp ect packa ges at any time. Th e court d etermine d that this n otice, in 6 conjunction with the warning on the Federal Express envelopes which read, “Do not send cash,” diminished any reasonable expectation of privacy defendants had in the packages. Young now challenges the district court’s conclusion, and submits that the seiz ure and subseq uent sear ch of the packag es violated his rights under th e Four th Am endme nt. A. The district court relied heavily on United States v. Barry in reachin g its decision. 673 F.2d 912 (6th Cir. 1982). In Barry, defendant sought to suppress contraband observed by Federal Express employees in a damaged package turned over to th e DEA . Id. at 913-14. The package, which contained a large quantity of prescription pills with the pharmaceutical numbers effaced, was damaged en route, exposin g the con traband inside. Id. Federal Express employees searched the packag e and the n contac ted the D EA, w hose ag ents pro ceeded to examin e its contents withou t first obtain ing a w arrant. Id. at 914. The court determined that defendant’s privacy interest depended on two factors: the risk of exposure and the incrimin ating app earance o f the con traband . Id. at 919. With respect to the first factor, the court found that Barry should have considered the risk of exposure when he shipped the package with Federal Express – that is, the possibility that Federal Express would open the package for security reasons, an accident or 7 damage – and choosing to accept this risk reduced his “subjective expectation of privacy in the parcel he consigned.” Id. As to the second factor, the court noted that the incriminatin g nature of th e materials shipp ed was a fac tor within B arry’s control, a nd thus he could have tak en greate r precau tions to d isguise th e shipm ent, but instead shipped a large amount of pills in clear bottles plainly labeled with the name o f the dru g. Id. Thus, the court held: In light of Barry’s failure to take precautions to protect his priva cy interest f rom the risk of ex posure inheren t in his bailm ent, we f ind that h e had no reasona ble expectatio n of priv acy in his d rug par cel. Id. Though the facts of Barry differ from those here – in that the Federal Expre ss agents initiated an d cond ucted the initial search themselv es – the S ixth Circuit does suggest that the act of shipping the contraband with a private carrier without taking proper precautions to “disguise the shipment” would, in and of itself, eliminate any reasonable expectation of privacy the defendants had in the packag e. How ever, Barry does no t stand alo ne. It seem s to us tha t the Sixth Circuit’s decision in Barry must be considered in the context of the Supreme Court’s decision in Jacobsen – a decision rendered two years after Barry. United States v. Jacobsen, 466 U.S. 109 (1984). The facts of Jacobsen are virtually identical to those in Barry. Employees of 8 a private freight carrier, during their examination of a damaged package, observed a white p owde ry substa nce. Id. at 111. Upon this discovery, the employees summoned a federal agent, who extracted some of the powder and subjected it to a chemica l test that dem onstrated it was co caine. Id. The C ourt ultim ately determin ed that de fendan t Jacobse n, as in Barry, lacked any reasonable expectation of priva cy in the p ackage. Id. at 119. The reasoning, however, differed in key respects from that of the Sixth Circuit. Significantly, the Supreme Court recognized that packages shipped with private carriers are “effects” within the meaning of the Fourth Amendment, and further noted: Letters and other sealed packages are in the gen eral class of effects in whic h the pu blic at large has a legitim ate expectation of privacy; warrantless searches of such effects are presumptively unreasonable. Even when govern ment ag ents may lawfully seize such a packag e to prevent loss or destruction of suspected contraband, the Fourth Amendment requires that they obtain a warrant before examining the contents of such a package. Id. at 114. Defendant’s privacy interest in this particular package was eliminated, the Cou rt determ ined, w hen the F ederal E xpress e mploye es exam ined it and : [O]f the ir own accord, in vited the f ederal ag ent to their offices fo r the exp ress pur pose of viewin g its conte nts. The ag ent’s view ing of w hat a priv ate party h ad freely made available for his inspection did not violate the Fourth Amen dment. Id. at 119. Thus, though the Supreme Court ultimately reached the same 9 conclusion as the Sixth Circuit, its reason for finding that the defendant lacked a privacy in terest in his packag e stemm ed from the fact tha t the third p arty open ed it of its own accord, and the government agents merely repeated a search that was already conducted by the private party. The Supreme Court acknowledged Barry, and while neither adopting nor rejecting its test for determining a person’s privacy interest in a package, narrowed its holding to the fact that the private shipper initiated and conducted the initial search. Here, too, the Federal Express packages were “effects” in the context of the Fourth Amen dment, a nd there fore def endants presum ptively po ssessed a legitimate expectation of privacy in their contents. Per Jacobsen, this priva cy interest w ould have been eliminated had the Federal Express employee inspected the package, discove red the cu rrency an d then co ntacted th e IRS a gents to r eplicate the search. This did not happen. Instead, the IRS agents initiated contact with Federal Express, obtained the package s, and x-rayed them off-site, all without first obtainin g a war rant. 1 Thus we are dealing with a warrantless government search, and not a private search as in Barry and Jacobsen. Cf. United States v. Souza, 223 F.3d 1197, 1202 (10th Cir. 2000) (search of UPS package was a governm ent search 1 The use of an x-ray device to project electronic emanations through an object and reveal, in picture form, the shape of the objects within the package constitutes a search within the meaning of the Fourth Amendment. United States v. Haynie, 637 F.2d 227, 230 (4th Cir. 1980), cert. denied, 451 U.S. 972 (1981). 10 where government agent actively encouraged UPS employee to open package, and employ ee did so because she wa s influen ced by en courag ement). However, though we believe Jacobsen must be considered, our facts differ significantly. As part of the contract, and on the reverse side of each and every Federal Express airbill utilized by defendants we find the following notice: RIGHT TO INSPECT We may, at our option, open and inspect your packages prior to or after you give them to us to deliver. These airbills were placed in the front pouch of each of the large “Fed Ex Pak” envelop es used to ship the c urrency . Just abo ve this po uch w as a plainly visible warning, in all capital letters, which read: “DO NOT SEND C ASH.” We believe that the presence of the above-quoted notice and warning remov es this case from th e ambit o f post-Jacobsen jurispru dence. S imply pu t, this bold, un qualified “right to in spect” ren ders ou r factual sc enario h ere irreco ncilably different from Jacobsen. It appears to us that the terms and conditions of the contracts between Federal Express and its customers have probably changed since the Supreme Court’s 1984 decision.2 In addition, we are convinced that if the Court had been faced with the explicit notice present here, its decision would have 2 Notations on the airbills themselves reflect such periodic revisions. Each airbill in the record before us contains a note in the bottom right corner indicating either “Rev. 1/91" or “Rev. 8/89.” 11 been otherwise.3 This is best illustrated by returning to Katz, the Supreme Court’s earlier expectatio n of priv acy test. Katz v. United States, 389 U .S. 347 (1967 ). First, Katz requires that we a sk wh ether def endants ’ actions ex hibited an actual (i.e., subjectiv e) expec tation of p rivacy. Id. at 361 (Harlan, J., concurring). As Young and his cohorts sealed the money in closed containers they undoubtedly were trying to hide the contents from the world. They certainly had a subjective expectation (or hope) of privacy. Second, we question whether this subjective expectation is one “that society is prepared to recognize as ‘reasonable.’” Id. We think not. No reasonable perso n would expect to retain his or her p rivacy interest in a packaged shipment after signing an airbill containing an explicit, written warnin g that the c arrier is au thorized to act in dir ect contra vention to that inter est. Federal Express told its customers two things: (1) do not ship cash, and (2) we may open an d inspec t your pa ckages a t our op tion. As a matter o f law, this simply eliminates any expectation of privacy. We affirm the district court’s finding that Young did not have any legitimate expectation of privacy in the packages x-rayed 3 The Supreme Court in Jacobsen noted that Federal Express agents opened the packages at issue there “pursuant to a written company policy regarding insurance claims.” Id. at 111. We surmise that Federal Express began including the notice now appearing on its airbill sometime after, and perhaps in response to, the Jacobsen decision. We are confident that had such a provision been present the Supreme Court would have considered and discussed it. 12 by the IRS agents. B. As an alternative basis for affirming the denial of the motion to suppress, we also find a consen t to search throug h the bailm ent relation ship. Jus t as the “righ t to inspect” n otice defe ated Yo ung’s p rivacy inte rest, we b elieve it also served to defeat Young’s Fourth Amendment challenge because it authorized Federal Expre ss, as a baile e of the p ackages , to conse nt to a sear ch. Frazier v. Cupp, 394 U.S. 731 (1969). 4 Courts have recognized that a third party has actual authority to consent to a search of a container if the owner of the container has expressly authorized the third party to give consent, or if the third party has mutual use of the container and joint acces s to or co ntrol ov er the con tainer. See, e.g., U nited Sta tes v. Fultz , 146 F.3d 1102, 1105 (9th Cir. 1992). We see no reason why this concept should not extend to packages shipped through private carriers when those carriers have explicitly w arned th ose utilizin g their ser vices that th eir packa ges are su bject to search. We find analogous the Fourth Circuit’s decision in United States v. Clarke, 4 In Cupp, defendant challenged the trial judge's decision to allow clothing seized from his duffle bag to be introduced into evidence. Id. at 740. The duffle bag was used jointly by defendant and his cousin, Rawls, and it had been left in Rawl's home. Id. When Rawls was being arrested he consented to a search of the bag, and it was during this search that the officer found the clothing that was subsequently received in evidence. Id. Affirming the trial court's decision to receive the evidence, the Court found that defendant assumed the risk that Rawls might consent to a search. Id. 13 where the cour t affirmed the district c ourt’s de nial of de fendan t’s motion to suppre ss drug s found by office rs in a too lbox. United States v. Clarke, 2 F.3d 81, 85 (4th Cir. 1993). Defendant in Clarke contend ed that a ca r search b y a state trooper violated his rights under the Fourth Amendment. Defendant had hired a third party – a fellow named Latimer – to transport a toolbox packed with narcotics to his bro ther. Du ring the tr ip, Latim er was s topped by a troo per and consen ted to a search of the car and, significantly, the toolbox. Distinguishing the car search from the search of the container, the court held: [W]he n Clark e hired L atimer to tr anspor t the toolb ox to his brother, he took the risk that Latimer would consent to a search of the car and the toolbox. We need not address whether the loan of an automobile to another person invests th at individ ual with authority to conse nt to the search of every item in the car. Where the very purpose of retaining Latimer was to transport drugs in a container, Latimer plainly possessed authority to consent to a search of that container. Id. The ev idence h ere is even more co mpelling . It is not ne cessary fo r us to draw in ferences from th e eviden ce, like the F ourth C ircuit wa s forced to do in Clarke, as to whether Federal Express possessed authority to consent to a search of the packages. When Y oung and his co-defen dants chose to utilize Federal Express they were unequivocally on notice, as evidenced by the plain language of the 14 airbill, that th is private c arrier retain ed the rig ht to insp ect their pa ckages. Certainly one with full possession and control along with the right to inspect has the authority to consent to a search by law enforcement officials. Defendants were also warned not to send cash. Being fully aware that the carrier might conduct, or consen t to, a search of pack ages con taining ex pressly p rohibited material, defend ants nev ertheless c hose to s hip large amoun ts of cash with F ederal E xpress. Young assumed the risk that Federal Express might consent to a search. When Federal Express did consent, Young’s Fourth Amendment rights were not offended.5 IV. For the reasons set forth a bove, th e judgm ent of the district cou rt is AFFIRMED. 5 Young raises seven other issues on appeal: a) that the district court abused its discretion in limiting Young’s good faith defense to the conspiracy count and by refusing to permit Young to present evidence on “public authority” and “entrapment by estoppel”; b) that the district court erred by refusing to suppress evidence that Agent Sutherland acquired during his two-year review of DTM’s 637 certificate; c) that the district court erred by failing to strike testimony regarding a prior bad act and abused its discretion by refusing to grant a mistrial or issue a curative instruction; d) that the district court plainly erred in permitting the United States to amend the indictment mid-trial to change factual allegations concerning the amount of gallons of diesel fuel sold and taxes owed; e) that the district court erred in imposing an upward adjustment to Young’s sentence for obstruction of justice for Young’s failure to appear at sentencing; f) that the district court erred in calculating tax loss at sentencing; and g) that the district court erred in imposing an upward adjustment for sophisticated means at sentencing. We find no merit in any of these challenges, nor do we believe they warrant discussion. We affirm the district court in each instance. See 11TH CIR. R. 36-1. 15