[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
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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.”
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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.
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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
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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
United States v. Raymond David Young
Court: Court of Appeals for the Eleventh Circuit
Date filed: 2003-11-18
Citations: 350 F.3d 1302
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