In a recent decision1 that provides important guidance in the developing law related to government seizure of electronic records in criminal investigations, on June 17, 2014, the United States Court of Appeals for the Second Circuit overturned the conviction of an accountant on personal tax evasion charges. The Second Circuit held that the Fourth Amendment’s prohibition on unreasonable searches and seizures prohibits the government from using electronic documents seized pursuant to a search warrant but beyond the scope of the warrant in future different criminal investigations.
Background
The case arose when the United States Army Criminal Investigation Command (Army CID) received a confidential tip alleging that a contractor hired to provide maintenance and security services to an Army facility had committed theft and fraud. The tipster stated that evidence of the criminal activity could be found in the offices of the contractor, Industrial Property Management (IPM), an affiliated company, American Boiler, and their accountant, Stavros M. Ganias. Based on this information, Army CID obtained a warrant to seize from Ganias’s offices: “All books, records, documents, materials, computer hardware and software and computer associated data relating to the business, financial and accounting operations of [IPM] and American Boiler….”2
In November 2003, pursuant to the warrant, agents from Army CID and its specialized Computer Crimes Investigative Unit copied the hard drives of three computers found in Ganias’s office, which included electronic files containing Ganias’s personal financial records that were beyond the scope of the warrant. Government investigators provided copies of the imaged hard drives to the Internal Revenue Service (IRS) for its own review and analysis.
By December 2004, about 13 months after the seizure of Ganias’s electronic data, the government investigators had isolated and extracted all of the computer files that were relevant to IPM and American Boiler. The investigators, however, did not purge the materials outside the scope of the warrant despite assurances allegedly provided to Ganias at the time of the search that they would delete these files from the imaged hard drives.
During a proffer session approximately two and a half years later, when the government’s investigation expanded to include personal tax evasion by Ganias, government agents asked Ganias and his attorney for permission to access the personal computer files obtained from Ganias’s office during the initial search. Ganias did not respond and the government obtained a warrant to search the imaged hard drives.
Following a jury trial, Ganias was convicted of two counts of tax evasion and sentenced to 24 months’ imprisonment.
The Second Circuit Decision
In a strongly worded opinion, the Second Circuit vacated Ganias’s conviction, holding that “the Government violated Ganias’s Fourth Amendment rights by seizing and indefinitely retaining non-responsive computer records, and then searching them when it later developed probable cause.”3 Once the computer files relevant to the investigation of IPM and American Boiler had been extracted, absent some independent basis for retaining Ganias’s personal files, “the Government clearly violated Ganias’s Fourth Amendment rights by retaining the files for a prolonged period of time and then using them in a future criminal investigation.”4
Recognizing that modern investigations are now frequently based on electronic evidence, the Second Circuit acknowledged that “the ability of computers to store massive volumes of information presents logistical problems in the execution of search warrants.”5 Under the Fourth Amendment, originally intended to guard against the “general warrants” issued by the British Crown, search warrants must state with particularity the areas to be searched and the items to be seized. Thus, the court concluded, “[i]f the government could seize and retain the non-responsive electronic records indefinitely [to search later] whenever it later developed probable cause, every warrant to search for particular electronic data would become, in essence, a general warrant.”6
However, the Second Circuit stopped short of holding that the government was required to purge Ganias’s personal files once the responsive files had been culled and segregated. The government argued that returning or deleting non-responsive files would “compromise the remaining data that was responsive to the warrant, making it impossible to authenticate or use it in a criminal prosecution.”7 The court did not expressly reject the government’s argument. Instead, the decision left open the possibility that indefinite retention of an imaged hard drive may not run afoul of the Fourth Amendment if not used for any purpose other than to preserve the evidentiary chain of custody.
Implications
With so many white-collar criminal prosecutions now based on electronic evidence, the law governing the techniques the government may use in obtaining such evidence is still developing. When executing search warrants, investigators, as they did in the Ganias case, often make wholesale copies of entire hard drives and, in doing so, undoubtedly obtain material that is beyond the scope of the warrant. This practice is akin to the government seizing entire file cabinets of paper records from an office, even when a warrant only permits them to seize records relevant to the criminal investigation that was the basis for the warrant. The law would not permit the government to retain paper records that were beyond the scope of the warrant. Now, the Ganias case demonstrates that while the courts will be sensitive to factors that distinguish electronic records from paper records, such as the need to preserve the electronic chain of custody, they will not permit the government to keep electronic files seized beyond the scope of the warrant indefinitely and then use them years after they were seized to support a separate criminal investigation.
