E.D.Wis.: 50% owner of business did private search and gave records to IRS

Defendant’s business records were taken by a 50% owner of their business and turned over to the IRS. The government didn’t prompt or suggest the seizure of the records. Once they were turned over, they could be fully reviewed by the IRS. United States v. Koutromanos, 2016 U.S. Dist. LEXIS 55966 (E.D.Wis. March 7, 2016), adopted 2016 U.S. Dist. LEXIS 55967 (E.D.Wis. April 27, 2016):

1. Law Enforcement Knowledge and Acquiescence

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The evidence does not show that that the IRS agents in any way encouraged Bouikidis or Maltezos to obtain Omega’s records, and their knowledge that Bouikidis or Maltezos wanted to provide records is insufficient to show acquiescence in the search.

2. Bouikidis and Maltezos’ Purpose

As to the second factor—the private party’s purpose—Koutromanos argues that Bouikidis and Maltezos’ primary purpose in conducting the search was to assist law enforcement and that Bouikidis’ many contacts with the federal agents indicated that he was an informant.

The Shahid court makes clear that the fact a private party “‘might also have intended to assist law enforcement,'” does not transform him into a government agent “so long as ‘the private party has had a legitimate independent motivation for engaging in the challenged conduct.'” 117 F.3d at 326 (quoting United States v. McAllister, 18 F.3d 1412, 1418 (7th Cir. 1994)). In this case, the evidence shows that even if Bouikidis and Maltezos intended to assist law enforcement, they also had their own, independent motivations. Bouikidis testified that he brought up the topic of the Omega Restaurant with the IRS agents “for [his] own reasons,” which included supporting “the thing [he] started with [the] IRS.” (Tr. 45.)

3. Rewards

Though Koutromanos concedes that the record does not contain evidence that the agents ever offered Bouikidis or Maltezos a reward (Def.’s Br. at 21), he contends that Bouikidis and Maltezos’ subjective belief they would be rewarded establishes that they were de facto government agents. Even if reward was on the minds of Bouikidis and Maltezos, as evidenced by Bouikidis applying for a reward (Tr. 38-39), Bouikidis did not learn about the possibility of a reward from the IRS agents (Tr. 39), as Koutromanos acknowledges. Rather he learned about the possibility of a reward from his friend Gus at El Greco’s Restaurant. (Id.) Thus, the record does not show that the government induced Bouikidis or Maltezos to obtain the Omega records with a promise of a reward.

4. Warrant

Finally, Koutromanos argues that even if the government’s seizure of Koutromanos’ papers through Bouikidis and Maltezos did not offend the Fourth Amendment, its search of them did. (Def.’s Br. at 30.) Koutromanos argues that the government’s search of his papers exceeded the scope of any prior private search conducted by Bouikidis. (Id. at 33.)

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On this record, I conclude that Maltezos was better situated to know his business relationship with Omega and his ability to access Omega’s office and records than Bouikidis. Maltezos’ testimony that during the relevant time he remained 50 percent owner of Omega is not contradicted by the reports that he lost control of the daily activities of Omega. (Exh. 13 ¶¶ 2, 10.) As co-owner and co-manager of Omega, Maltezos continued to have access to the office (Tr. 78) and the combination to the office lock (Tr. 68). He testified that the records were on top of the desk that he shared with Koutromanos and that the records were “[his] records too.” (Tr. 68-70, 76.) Like in Aldridge, Maltezos was not a “stranger or casual friend,” but the co-owner and co-manager of the business. Thus, as in Aldridge, I find that Maltezos had authority to consent, and did consent, to the government’s acquisition of Omega’s documents when he gave the records to Bouikidis with knowledge that Bouikidis would in turn share them with the IRS.

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