Benjamin Wey Wins Suppression Order In Securities Fraud Criminal Case

June 19, 2017

Benjamin Wey has been embroiled in criminal, civil, and regulatory proceedings for the past few years. Wey and his legal team have responded with all the tools at their disposal and battled on -- and when I say "battle," you should think along the lines of mutual assured destruction and not thumbing one's nose. That aggressive defense strategy achieved the reversal of a NASDAQ delisting in the landmark Securities and Exchange Commission's Cleantech Innovations decision. Following lurid allegations of sexual harassment and other claims against Wey by former employee Hanna Bouveng, a federal jury awarded her $18 million (of which $16 million was in punitive damages), which was reduced to $5.6 million by a federal judge.  A few days ago, Wey's defense team achieved what many see as a epic victory in the form of a suppression order that may have seriously hindered if not effectively destroyed the Department of Justice's criminal case against Wey. Frankly, in some 32 years of practicing law, I have rarely read a more stunning Fourth Amendment ruling.

I urge all industry professionals to take the time to familiarize yourself with the issues noted in Wey's suppression motion and subsequent Southern District of New York Opinion and Order. Given the 92-page length of the Opinion and Order, it is not possible to fully digest its findings and rationale within the confines of the Blog and I pointedly make no boast of doing so.  In relatively superficial fashion, I will try to present to you some of the key issues.

A word of caution to my readers. To say that Benjamin Wey is a lightning-rod of a personality would be an understatement. He is, if nothing else, a man of strong opinions and the media-savvy to convey his thoughts with dramatic impact. None of which is to suggest -- not even remotely -- that this author or the Blog agree with any of Wey's positions or support his public relations approach. Notwithstanding, even the pariahs among us are entitled to the full protections of the law; and it is in those very difficult and challenging cases where the majesty of our system of justice best shines when it discharges its duty behind the blindfold and with due process and fairness.

WILLIAM ROPER: So, now you give the Devil the benefit of law! 

SIR THOMAS MORE: Yes! What would you do? Cut a great road through the law to get after the Devil? 

Yes, I'd cut down every law in England to do that! 

SIR THOMAS MORE: Oh? And when the last law was down, and the Devil turned 'round on you, where would you hide, Roper, the laws all being flat? This country is planted thick with laws, from coast to coast, Man's laws, not God's! And if you cut them down, and you're just the man to do it, do you really think you could stand upright in the winds that would blow then? Yes, I'd give the Devil benefit of law, for my own safety's sake!

A Man for All Seasons (Columbia Pictures, 1966, play/screenplay Robert Bolt)

2015 Indictment

On September 8, 2015, Benjamin Wey, founder and President of the New York Global Group, Inc. ("NYGG"), was charged in an 8-count Indictment alleging fraud, wire fraud, conspiracy to commit securities and wire fraud, money laundering, and failure to disclose beneficial ownership of publicly traded companies. United States of America v. Benjamin Wey a/k/a "Benjamin Wei" a/k/a "Tianbing Wei" AND Seref Dogan Erbek a/k/a "Dogan Erbek" Defendants (Indictment, 15-CR-611, Southern District of New York, September 8, 2015). NYGG is characterized in the Indictment as offering, in part, consulting services to China-based companies seeking to raise funds in the United States capital markets. The Indictment alleges that Defendants Wey and Erbek conspired between 2007 and 2011 with others to:

defraud  the investing public by orchestrating and facilitating (1) WEY's undisclosed amassing of beneficial ownership of more than five percent of the stock of certain publicly traded companies; and (2) manipulation of the market price and demand for the stock of those companies in which WEY had covertly amassed substantial beneficial ownership interests.

Pages 2 - 3 of the Indictment

NOTE: An Indictment contains merely allegations and a Defendant is presumed innocent unless and until found guilty beyond a reasonable doubt in a court of law.

Komar Affidavit and Office Search Warrant

About three and a half years before the issuance of the Indictment, on January 24, 2012, Federal Bureau of Investigation ("FBI") Special Agent Matthew F. Komar swore out an affidavit in support of an application for a warrant to search NYGG's Manhattan located at 40 Wall Street, Suite 3800 (the "Komar Affidavit"). As set forth in United States of America v. Benjamin Wey, Defendant (Corrected Opinion and Order; 15-CR-611, Southern District of New York), the Komar Affidavit sought:

permission to seize from NYGG's offices twelve expansive categories of materials set forth on an appended exhibit, with the limitation that the materials concern at least one of an independently appended list of approximately 220 named individuals and entities believed to be in some way connected to Wey's purported scheme . . . It also sought court approval to seize, copy, and/or digitally image computers and related electronic equipment believed to contain such materials and to conduct offsite searches of the devices' contents. According to the Komar Affidavit, in view of the highly technical and specialized procedures and substantial time investment required to effect thorough searches of the potentially voluminous data contained within this equipment- including deleted; concealed, or encrypted files - and extract relevant material while maintaining the integrity of the evidence, it would in many cases be impractical, if not impossible, to effectively do so onsite. . .

Page 7 of the Corrected Opinion

Garwood Affidavit and Apartment Search Warrant

In addition to the warrant sought to search NYGG's offices, FBI Special Agent Keith Garwood swore out an Affidavit on January 25, 2012, seeking to search the Manhattan apartment that Wey shared with his wife, Michaela, and their children (the "Garwood Affidavit"). The Garwood Affidavit asserted that:

FBI personnel had interviewed NYGG employees during the search of the firm's offices earlier that day and learned that Michaela Wey served as NYGG's "office manager" and "bookkeeper" but generally worked out of the Wey Apartment, where she would, among other things, perform accounting and payroll functions and mail checks . . . [and] that Wey caused certain Issuer stock certificates for new round-lot shareholders to be sent to the Wey Apartment, that certain Nominees had wired substantial sums of money to accounts held in the name of Michaela Wey, and that Michaela Wey had once been listed in an SEC filing as an executive officer of NYGG. . . .

Page 8 of the Corrected Order

Warrants Issued

United States Magistrate Judge Olinger issued a search warrant for the NYGG offices on January 24, 2012, and that warrant identified the premises as NYGG's office at

40 Wall Street, 38th Floor, Suite 3800, New York, New York, and any closed or locked cabinets, briefcases, and other containers kept therein, including computers and electronic storage devices, excluding the individual office of James Baxter, Esq."

Page 9 of the Corrected Opinion

On January 25, 2012, Magistrate Dolinger issued a search warrant for the Wey Apartment, which authorized the seizure from the premises of, for example:

All "financial records," "internal and external communications," "correspondence," "photographs," "audio tapes," and "video tapes" concerning either of the Apartment's two adult occupants.

Page 13 of the Corrected Opinion

Suppression Hearing

Following the searches of the office and apartment, Defendant Wey moved to suppress the information and materials uncovered. The Court determined to hold a hearing in order to consider whether the government had acted:

reasonably and in good faith in executing off-site searches of computers and computer related equipment recovered during the execution of the Warrants. Dkt. No. 69. Accordingly, the Court conducted a two-day suppression hearing on January 23 and January 24, 2017 (the "Hearing"), at which it heard live testimony from former Assistant United States Attorney David Massey, Special Agent Komar, Special Agent Thomas McGuire, Special Agent Elizabeth Miller, forensic examiner and information technology specialist Brian Booth. . .

Page 14 of the Corrected Opinion

In his arguments seeking suppression of the fruits of the searches, Wey characterized the NYGG and Wey Apartment Warrants as:

insufficiently particularized, overbroad "general warrants," and because the Government's lengthy (and continuing) retention and indiscriminate review of the vast trove of confiscated electronic materials must be deemed unreasonable under the circumstances.

Page 36 of the Corrected Opinion

Suppression Granted

In a dramatic and compelling Opinion, Judge Nathan granted Wey's request for suppression. In summarizing her rationale for supression, Judge Nathan stated that:

The Court has little difficulty concluding that, for several reasons, both the NYGG Warrant and the Apartment Warrant fail to describe the items to be seized with the requisite particularity. Because the Warrants are, as discussed above, substantially identical in their description of the items subject to seizure, the Court does not distinguish between them for purposes of this analysis.

Page 44 of the Corrected Opinion

Sins of Omission

In one of the most jaw-dropping findings in the Corrected Opinion, the Court states that:

First, on their face, both Warrants fail to set forth the crimes under investigation. As noted, they neither cite criminal statutes nor in any way describe any suspected criminal conduct. Clearly, such matters are set forth in the supporting Affidavits, but because those documents are neither attached to nor incorporated into the Warrant themselves, the information they provide does not "cure an otherwise defective search warrant." Rosa, 626 F.3d at 64. Under the settled Circuit law set forth above, failure to reference the suspected crimes would alone be enough to render the Warrants insufficiently particularized. See 650 Fifth Ave., 830 F.3d at 99 ("for a warrant to meet the particularity requirement, it must identify the alleged crime for which evidence is sought"); George, 975 F.2d at 76 (warrant permitting search of evidence "relating to the commission of a crime" lacked particularity because "[n]othing on the face of the warrant tells the searching officer for what crime the search is being undertaken"); see also United States v. Romain,_ Fed. App'x _, 2017 WL 442175, at *1 (2d Cir. 2017) (Summary Order) ("[T]he government concedes that the warrant was facially deficient for failing to reference the criminal statutes that [defendant] was accused of violating even though the supporting document did contain that information.").

Page 44 - 45 of the Corrected Opinion

This aspect of Judge Nathan's analysis is intriguing. Magistrate Dolinger approved both warrants, so we have something akin to an intramural disagreement because the Magistrate apparently did not find the warrants facially deficient and did not require a further recitation of the "crimes under investigation." This is a fascinating point because Judge Nathan asserts that it is the settled law of the Second Circuit that the "failure to reference the suspected crimes would alone be enough to render the Warrants insufficiently particularized."

Sweeping Up With Discretion

When reading through the manner of the searches at issue, one quickly discerns why Wey may have been angered by the government's seemingly heavy-handed and arbitrary conduct:

Documents taken from the Wey Apartment included many of a personal nature, such as pharmaceutical prescriptions and related documents; materials reflecting information on medical appointments and examinations; X-rays of Wey family members; Wey's living will and health care directives; recreational sports schedules; documents, photographs and other mementos from Michaela Wey's secondary school, collegiate and law school careers; children's scholastic records and test scores; divorce papers from Wey's first marriage dating to the late 1990s; passports belonging to the Weys' children and other apparent family members; family photographs; and photographs of rural landscapes, among other things. See, e.g., Hearing Tr. at 167:4-169:19, 265:24-276:11; Def. Supp. Br. Exs. A, C. During the Hearing, Government witnesses offered post-hoc justifications for some of these seizures that the Court found unpersuasive. For example, AUSA Massey testified that a medical prescription information sheet for the Weys' child would have been within the scope of the Apartment Warrant if it reflected "pricing information" or "cost information" because they could go to the Weys' "personal expenses." Hearing Tr. 55:13-57:7. He also asserted that PSAT scores of the Weys' child would have been seizable if the score report "indicated where he would attend school." !d. 58:24-59:5. Additionally, newspaper clippings on Michaela Wey's collegiate tennis career were within the scope of the Apartment Warrant as long as they were found in a file with other documents that showed how the Weys first met in Oklahoma. !d. 59:25-60:7. Agent Komar found a document confirming .a dentist appointment for Michaela Wey responsive to the Warrants because "Michaela Wey's address is of relevance." !d. 167:10-18. Agent McGuire, for his part, characterized divorce records from Wey' s prior marriage seizable "if they talk about financial arrangements" because "then they would relate to financial records." . . .

Page 23 of the Corrected Opinion

In explaining its concerns about the sweeping, generic nature of the warrants at issue, the Court admonishes that:

In sum, the Warrants authorize the seizure of sweeping categories of materials, regardless of their potential connection (or lack thereof) to any suspected criminal activities and limited only by the requirement that they relate in some generalized way to the owner/occupant of the very premises subject to search. The conferral of such unfettered discretion on the executing officers, particularly in light of the Warrants' independent failure to identify any crime under investigation, is inconsistent with the Fourth Amendment's particularity requirement . . .

Page 49 of the Corrected Opinion

The Never-Ending Hold

In addition to being troubled by the over-seizures, the Court also was discomforted by the government's post-seizure retention of personal materials that appeared outside the legitimate scope of the alleged misconduct cited in the Indictment. In language that barely hides the Court's annoyance, we see that Judge Nathan was somewhat exasperated by the government's gamesmanship, which came off as largely unjustified and bordering on petty and petulant [Ed: Footnote omitted]:

The agents seized, between the two search locations, a variety of hard-copy materials purely personal in nature, or otherwise plainly outside the scope of the suspected securities and wire fraud scheme described in the Affidavits. As discussed above, these included medical records, prescription documents, X-rays, health care directives, educational records and scholastic mementos, divorce records, resumes, family photographs, recreational schedules, and other things. See supra Sections I.D.2.-3. To be sure, and as the Government emphasizes, several such items do appear to have been seized as part of larger sets of materials that could have been impractical to sort onsite (for example, the trash bag referenced above, which took something of a star turn in the Government's Hearing presentation) and thus were removed wholesale for offsite inspection. Gov't Supp. Opp. at 17. Even crediting such asserted logistical necessity as an explanation for some of these seizures, however, the record reflects that it does not apply to many others. See, e.g., Def. Supp. Br. Ex. A (identifying examples); see also Gov't Ex. 14 (Evidence Recovery Log from Apartment Search noting seizure of multiple sets of materials identified onsite as "personal" documents, such as "school" and "immigration" records and "estate planning" documents).

In addition, it appears that following seizure, the Government completed pertinence review of these hard-copy materials by late 2012. To date, however, essentially none of the originals have been returned to NYGG or the Weys, Hearing Tr. 335:4-11, despite the requests of counsel -- a potential constitutional violation in and of itself. See, e.g., United States v. Tamura, 694 F.2d 591, 596-97 (9th Cir. 1982) ("We likewise doubt whether the Government's refusal to return the seized documents not described in the warrant was proper."); see also Ganias, 824 F.3d at 230 (Chin, J., dissenting) (in cases where offsite review was required because "potentially relevant documents [were] interspersed through a large number of boxes or file cabinets," generally "non-responsive documents were to be returned after the relevant items were identified").

Perhaps more troubling than either the initial seizure or the continuing retention, however, are the efforts of the Government and its Hearing witnesses to leverage the inappropriately expansive terms of the Warrants into strained explanations of why these 79 Case 1:15-cr-00611-AJN Document 114 Filed 06/13/17 Page 79 of 92 materials were in fact properly seized. See, e.g., Hearing Tr. 56:17-57:7, 58:24-59:5,59:25-60:7, 167:10-18, 304:24-305:3; Opp. at 40. Indeed, in maintaining, as discussed above, that children's school records, medical prescriptions, divorce records, and decade-old clippings from the sports section of the college newspaper among other things fell within the scope of the Warrants because they purportedly bore vague connections to the Weys' personal histories and finances, the Government and its agents leave the Court to find that much- perhaps even most- of the overseizure was not the result of expediency, mistake, or even simple negligence. To the contrary, it seems, this material was reviewed, and a conscious effort was made to deem patently unresponsive materials responsive to the Warrants. Its presence in the Search fruits thus suggests that the execution teams affirmatively wielded the nearly unfettered discretion afforded them by the Warrants' expansive terms to appropriate documents that were perhaps of interest to some broader investigation of the Weys' lives and finances but that bore little or no discernible connection to the securities fraud probable cause showing actually submitted to the Magistrate Judge. See, e.g., Hearing Tr. 276:14-20 (Agent McGuire testifying that it was "very important" that the FBI gain a better of understanding through the Searches of the Wey family's "very complex" "financial arrangements"). Put another way, it appears to be, as much as anything else, a product of the intentional execution of what amounted to general warrants

Pages 78 - 80 of the Corrected Opinion

Good Faith or Blind Faith?

Prosecutors often argue during suppression hearings, particularly when things are not going all that well for them, that mistakes and errors are somewhat inevitable during the conduct of a search. The test of such missteps, they content, should come down to whether the searching agents executed the search in "good faith." That's a very subjective term and, frankly, courts tend to stretch things in order to find that the government's actions may have been wrong but at least undertaken with good faith. That often grudging finding of good-faith often saves the day for an otherwise compromised search, even one where warrants may appear constitutionally deficient. Sure, the judge may suppress some particularly troublesome materials but the baby doesn't get thrown out with the bathwater.

Gross Negligence or Recklessness

The Fourth Amendment wasn't drafted to protect the government or prosecutors but to ensure that a search or arrest is undertaken reasonably. The resort to ordering the exclusion or suppression of evidence by a Court under the Fourth Amendment is a potent arrow in the quiver of deterring government excess and abuse. In balancing the constitutional protections against the government's obligation to investigate and prosecute crimes, Judge Nathan took cognizance of the government's "good faith" arguments but rejected them:

As the Court of Appeals has observed, "[g]ood faith is not a magic lamp for police officers to rub whenever they find themselves in trouble." United States v. Reilly, 76 F.3d 1271, 1280 (2d Cir. 1996).

Government agents leading a long-running, well-resourced investigation took weeks or months to draft proposed Warrants that were plainly lacking the basic features called for by the Fourth Amendment's particularity requirement and whose scope, partially as a result, grossly exceeded the probable cause showing ultimately made to the Magistrate Judge. Upon issuance of those Warrants, the agents deployed the trappings of good faith- an Operations Order, a briefing - while dispensing with more robust safeguards such as a requirement that the search personnel read the Affidavit, and then proceeded to conduct sweeping physical and electronic searches lacking in any discernible parameter beyond the inappropriately broad terms of the Warrants themselves. Interpreting and executing their authority expansively- in keeping, the evidence suggests, with the intention of the drafters- the agents treated the Warrants both during and after the physical Searches as, for all intents and purposes, general warrants.

The Court does not conclude that the agents acted with malice. But it does find that their conduct cannot be credibly explained by exigent circumstance, by simple mistake, or by mere negligence. The agents who are charged with reasonable knowledge of what the law prohibits appear to have disregarded well-established constitutional principles that provide a bulwark against the execution of general warrants. That reflects, at the least, gross negligence or recklessness as to the potential for violation of the Fourth Amendment. It cannot be that a facade of particularity and reasonableness built on superficial checkmarks in the Rosa boxes brings that conduct within the good faith exception. Echoing Judge Oetken in Zemlyansky, "[t]his conduct is deterrable, and the Constitution requires its deterrence." 945 F. Supp. 2d at 476.

Pages 86 -87 of the Corrected Opinion


The NASDAQ Stock Market, LLC  (Opinion, Securities and Exchange Commission, '34 Act Rel. No. 69968, Admin. Proc. File No. 3-14640 / July 11, 2013)

Also READ these Blog articles: