Antitrust Law Daily Trial reset for July in U.S. fraud case against Minnesota real estate company, owner
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Friday, May 17, 2019

Trial reset for July in U.S. fraud case against Minnesota real estate company, owner

By Matt Pavich, J.D.

Defendants seek to suppress evidence found in Department of Justice investigation into fraud and kickbacks relating to repair contracts for properties in the Minneapolis area owned by financial institutions.

A federal district judge in Minnesota has set July 16, 2019 as the starting date for the criminal trial involving Detloff Marketing, a Minnesota real estate company, the company’s owner and his wife. The trial was rescheduled as a dispute continues over suppression of evidence. A magistrate judge recommended denial of the defendants’ motion to suppress certain evidence and statements, finding that the owner voluntarily gave statements and consented to search the company storage area to investigators and that a search of garbage left outside his home was not improper (U.S. v. Detloff Marketing and Asset Management, Inc., Case No. 0:18-cr-00197-PAM-HB).

The government launched an investigation in 2013 into whether the company, the company’s owner, and his wife had conspired with others to rig bids or to subvert anti-fraud measures in order to win repair bids on properties owned by financial institutions. Government agents conducted a search of trash left on the curb in front of the owner’s home, resulting in search warrants for the residence and company offices.

On June 10, 2015, a federal agent interviewed the owner at the company offices, while other agents executed the search of the office premises. The agent who interviewed the owner was wearing a suit and his sidearm was not visible. The agents did not inform the owner of his Miranda right, but did warn him that lying would constitute a federal crime. The owner voluntarily consented to a search of the company’s storage area. At no point, did the agents handcuff or physically restrain the owner, but while he was free to leave, the agents never informed him of his right to do so. Ultimately, the defendants were indicted in 2018. In the face of the charges, the company and owner moved to suppress all statements the owner made during the interview and all evidence obtained as a result of the garbage search and the executed search warrants.

Report and recommendation. The magistrate judge denied the motion. The defendants argued that the results of the trash search should be excluded because the agent could not testify as to whether the trash was within the curtilage of the residence. The judge, however, ruled that the main question was whether, as it was, the trash was readily available to the public. Moreover, the agent testified seeing other trash containers in the neighborhood, implying that the owner placed his trash on the curb in anticipation of a regular garbage pickup.

The judge also denied the motion to exclude the owner’s statements because he was not in custody. Although neither of the interviewing agents could testify as to whether they ever affirmatively informed the owner that he could leave, the judge ruled that did not mean that he was in custody, such that the agents needed to give him a Miranda warning. The owner was in no way physically restrained, never asked to end the interview, and there was no evidence that his movement was restricted during the interview. Additionally, when the agent approached him, the owner agreed to an interview and suggested using his own office, further indicating that he was not in custody. There was also no evidence that the agents used strong-arm tactics to coerce the statements nor, given that only two agents questioned him, that the owner have those statements in a police-dominated atmosphere. The judge therefore declined to exclude the statements.

The judge also denied the motion to exclude the results of the storage area search. He signed a consent form that stated he had been advised of his right to refuse the search and did so voluntarily. There was no indication that he gave this consent while impaired in any way and the atmosphere in which he gave it was relaxed. Lastly, the judge also found that each search warrant was supported by probable cause and therefore denied the alternative motion to exclude them.

Defense objections. The defendants objected to the magistrate judge’s report and recommendation. They argued that the judge failed to consider the aspects of the trash pull, including on which side of the driveway the trash had been placed. They also argued that the agent failed to document the details of the search in any meaningful way. Most importantly, they argued that because the trash was still on the property, it was per se trespass to search it. As for the statements and consent to search the storage area, the defendants argued that the owner lacked the ability to give consent, due to the coercive custody environment in which he was placed during the interview.

Government response. In its response to the defense objections, the government contended that the magistrate judge correctly found that the owner was not in custody when law enforcement agents interviewed him in his private office on June 10, 2015 and, thus, the agents were not required to tell him that his participation was voluntary. The government also argued that that owner voluntarily consented to a search of the storage room and that the garbage search was proper because there is no expectation of privacy in trash abandoned on a curb.

Attorneys: Andrew K.M. Rosa, Jonathan Clow, Kevin C. Culum, Michael Neal Loterstein, and Molly Kelly for U.S. Department of Justice Antitrust Division. Ryan Patrick Garry (Ryan Garry, Attorney, LLC) for Detloff Marketing and Asset Management, Inc. Andrew S. Birrell and Ian S. Birrell (Gaskins, Bennett & Birrell, LLP) for Jeffrey K. Detloff. Joseph S. Friedberg (Joseph S. Friedberg, Chartered) for Lori K. Detloff.

Companies: Detloff Marketing and Asset Management, Inc.

MainStory: TopStory Antitrust AntitrustDivisionNews MinnesotaNews

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