United States v. Blocker

United States Court of Appeals,
Fifth Circuit.
No. 95-60286.
UNITED STATES of America, Plaintiff-Appellee,
v.
Perry G. BLOCKER, Defendant-Appellant.
Jan. 16, 1997.
Appeal from the United States District Court for the Southern District of Mississippi.
Before GARWOOD, HIGGINBOTHAM and BENAVIDES, Circuit Judges.
PER CURIAM:
Perry G. Blocker appeals his convictions and sentences for the offenses of mail fraud and bank
fraud. Blocker argues, among other things, that a search conducted by a Mississippi insurance
examiner, whom he contends was acting as an agent of the United States Government, violated the
Fourth Amendment. We disagree with this contention, and affirm in part and reverse in part on other
grounds.
BACKGROUND AND PROCEDURAL HISTORY
Defendant-appellant Perry G. Blocker, a Certified Public Accountant, was managing partner
of the DeMiller, Denny, and Word accounting firm. Dan White, a codefendant, owned or controlled
a number of companies in the finance and insurance fields. One group of those companies was
collectively referred to as the Andrew Jackson Group. This group included Andrew Jackson Life
Insurance Company (AJL), Andrew Jackson General Insurance Company, Andrew Jackson Casualty
Insurance Company, and Andrew Jackson Corporation. White also owned a number of other
companies in the finance and insurance fields. Blocker's accounting firm conducted the annual audit
work for the Andrew Jackson Group and affiliated companies. After several years of providing
financial advice to White, Blocker became the person in charge of running the Andrew Jackson
Group.
Sometime in 1990, the Mississippi Insurance Department (MID) informed Blocker and White
that there was a problem with the affiliation among the White-owned companies and their
interdependent investments. Subsequently, in December of 1990, Blocker purchased AJL from White
by signing a note.
Meanwhile, Thomas Gober was a contract employee of MID. MID contracted with Gober
to conduct triennial examinations of the financial ability and condition of domestic insurance
companies. Miss.Code Ann. § 83-1-25 (1972). During the course of his examinations of various
Mississippi insurance companies' records, Gober discovered what he believed to be criminal
violations. Gober informed his superiors at MID and was assured that he would not be held
responsible for any problems with his reports. Nevertheless, to protect himself from any charges of
wrongdoing, Gober later began to record surreptitiously conversations with various individuals at
MID.
In the fall of 1990, while examining the records of an unrelated insurance company, it
appeared t o Gober that the company was stealing from its policyholders. Gober included t is
h
information in his report and voiced his concern to his superiors at MID. He later learned that the
Federal Trade Commission (FTC) might be investigating the matter and became worried that the
allegations of wrongdoing would be deleted from his report.
Gober discussed his concerns with Jim Martin, a local attorney who arranged a meeting with
FTC officials. At that meeting, Gober advised the FTC officials of his concerns. In response, they
told him that he had a responsibility to notify the United States Attorney's office.
Gober subsequently met with Assistant United States Attorney James Tucker in September
1990. At Tucker's request, FBI Agent Glen Breedlove was also at the meeting. The three discussed
Gober's work as a certified financial examiner for MID, his conclusions that certain companies were
violating the law, and MID's response to his conclusions. Gober shortly thereafter agreed to furnish
the FBI with any evidence of criminal activity on the part of the Mississippi insurers or MID that he
encountered during the course of his work.
Beginning in September of 1990, Gober met periodically with Agent Breedlove and federal
prosecutors. At those meetings, Gober provided any evidence he encountered during his
examinations that indicated criminal activity. Gober subsequently requested compensation for his
time, and the FBI paid Gober at the same rate he was paid for his contract work for MID.
Additionally, the FBI provided Gober with a device for the clandestine recording of
conversations that he had with officials of both MID and the insurance companies. Gober recorded
all conversations because the FBI sought to avoid the accusation of selectively recording
conversations. Blocker's name had been added to the FBI's monitoring list while he still was a partner
at the accounting firm, prior to his purchase of AJL.
In March of 1991, the National Association of Insurance Commissioners (NAIC) sent out an
annual report to the MID indicating that AJL was a "first priority" company that needed immediate
regulator attention because of its low surplus and bond portfolio. MID thereafter notified Blocker
that an examination was scheduled for August of 1991.
Gober was assigned to conduct the triennial examination of AJL. No one at AJL or MID
knew of Gober's preexisting cooperative relationship with the United States Government. Gober
began recording Blocker's conversations at a meeting between AJL officials and MID officers prior
to the commencement of the actual examination of AJL.
Based on Gober's findings, and with Gober's assistance, Agent Breedlove prepared an affidavit
to obtain a warrant to search the records of AJL and its affiliates. The search warrant was secured,
and on February 7, 1992, the search warrant was executed, resulting in the seizure of voluminous
records from AJL and its affiliates.
On June 9, 1993, a grand jury returned an indictment charging Blocker and White with aiding
and abetting each other in the following offenses: 18 counts of mail fraud (defrauding the
policyholders, investors, shareholders, and regulatory agencies of the Andrew Jackson Group of
Insurance Companies in violation of 18 U.S.C. § 1341); and 2 counts of bank fraud (submitting false
financial statements to federally insured financial institutions in violation of 18 U.S.C. § 1014). The
indictment charged that Blocker and White aided and abet ted each other in defrauding the
policyholders, investors, shareholders, and regulatory agencies of the Andrew Jackson Group of
Insurance Companies: AJL (owned by Blocker); Andrew Jackson General Insurance Company; and
Andrew Jackson Casualty Insurance Company. More specifically, the indictment charged that
Blocker and White engaged in deceptive practices to continue to receive insurance premiums and
investments at a time when they knew that the companies involved were insolvent or impaired.
Blocker filed a motion to suppress the evidence found by Gober during his examination and
the evidence seized pursuant to the warrant. The district court, after conducting a hearing, denied
the motion in a memorandum opinion, rejecting Blocker's contentions that Gober in his examination
was an agent of the Federal Government and that the Mississippi statute that authorized the
administrative examination violated the Fourth Amendment. After a two-week trial, a jury found
Blocker guilty on the 18 counts of mail fraud and 2 counts of bank fraud.1 The district court
sentenced Blocker to 97 months imprisonment and ordered restitution in the amount of $5,708,051.
ANALYSIS
I. DENIAL OF MOTION TO SUPPRESS
Blocker contends that the district court erred in denying his motion to suppress the evidence
obtained by Gober prior to the execution of the search warrant and all the evidence seized pursuant
to the warrant. He argues that Gober was acting as an agent or instrument of the Government when
Gober gathered the evidence that resulted in his prosecution. "On appeal from the denial of a motion
to suppress we review the district court's factual findings under the clearly erroneous standard and
its conclusions of law de novo." United States v. Johnson, 16 F.3d 69, 71 (5th Cir.1994). This Court
has treated the district court's determination whether a person is acting as an agent for the
Government as a factual finding. United States v. Jenkins, 46 F.3d 447, 460 (5th Cir.1995).2
It is well settled that if a private party wrongfully conducts a search or seizure of another's
person or property the Fourth Amendment is not violated and that such private misconduct does not
deprive the Government of the right to use evidence that it has obtained legally. Walter v. United
1
The indictment had also charged three counts of money laundering in violation of 18 U.S.C. §
1957(a); however, the jury acquitted Blocker on the three money laundering counts.
2
A factual finding is clearly erroneous if, "although there is evidence to support it, the
reviewing court on the entire evidence is left with the definite and firm conviction that a mistake
has been committed." Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573, 105 S. Ct.
1504, 1511, 84 L. Ed. 2d 518 (1985) (citation omitted).
States, 447 U.S. 649, 656, 100 S. Ct. 2395, 2401, 65 L. Ed. 2d 410 (1980). The question is whether,
in view of the circumstances of the case, the private party acted as an i nstrument or agent of the
Government when he conducted the search. Coolidge v. New Hampshire, 403 U.S. 443, 487, 91
S. Ct. 2022, 2049, 29 L. Ed. 2d 564 (1971).3
To make such a determination, this Court, in recent years, has applied the test articulated by
the Ninth Circuit in United States v. Miller, 688 F.2d 652, 657 (9th Cir.1982): (1) whether the
Government knew or acquiesced in the intrusive conduct; and (2) whether the private party intended
to assist law enforcement efforts or to further his own ends. Jenkins, 46 F.3d at 460; United States
v. Pierce, 893 F.2d 669, 673 (5th Cir.1990); United States v. Bazan, 807 F.2d 1200, 1203 (5th
Cir.1986), cert. denied, 481 U.S. 1038, 107 S. Ct. 1976, 95 L. Ed. 2d 816 (1987). In each of those
cases, we assumed that the Ninth Circuit's test was an adequate formulation.4
The district court below, after considering all the facts and circumstances surrounding the
MID audit and Gober's relationship with the FBI and United States Attorney's office, denied the
motion to suppress, concluding that:
"... Gober's examination of the records of Andrew Jackson Life was a legitimate exercise of
his authority on behalf of the MID to discern the company's financial condition and was not,
as Blocker contends, a pretext to search for evidence of criminal activity.... [T]he court is
persuaded that Gober did not deliberately use the administrative examination procedure as
a pretext for conducting a criminal investigation. The court is persuaded that Gober's purpose
at Andrew Jackson Life was not to search for evidence of criminal activity, either as an agent
of the state government or t he federal government. Rather, his purpose was to perform a
financial examination of Andrew Jackson Life in his capacity as an examiner for MID, and
that is precisely what he did. During the course of that examination, he disclosed information
and evidence to the FBI. But that was not the purpose for his presence on the premises, or
the reason for his examination. The court, therefore, rejects defendant's contention that
3
The Government argued in the district court that Blocker lacked standing to challenge the
search and seizure of AJL's records. The district court opined that resolution of the standing issue
was unnecessary, given its ultimate conclusion that neither AJL's nor Blocker's Fourth
Amendment rights were violated. Because we agree with this conclusion, we need not consider
the standing issue.
4
Prior to those cases, this Court had indicated that "[p]reknowledge and acquiescence [of the
government] make a search by a private party a search by the government." United States v.
Clegg, 509 F.2d 605, 609 (5th Cir.1975). Accordingly, "[a]ny evidence which, for Fourth
Amendment reasons, would have been excluded had it been gathered by the government pro se
would, of course, have to be excluded if gathered by the only nominally private party." Id. We
explained that the evidence would be excluded to deter the Government from knowingly using a
private party to do that which it is prohibited from doing.
Gober used his position as examiner as a pretext for conducting a warrantless search for
criminal activity." (Footnotes omitted).
In making this determination, the court relied upon, inter alia, uncontroverted evidence that
Gober's examination of AJL was pursuant to and a part of MID's regular triennial examination of
AJL; that Gober "conducted his examinations the same way after he commenced his relationship with
the FBI as he had before"; that he "received his assignments from the MID and neither he, nor the
FBI or United States Attorney's office had any control in directing him to any particular company,
including Andrew Jackson Life"; and "though Gober received compensation from the FBI, it is clear
that the compensation was for his time away from work and from his family, and not for his "services'
or for the information he provided." The district court also found that Gober's MID examination of
AJL would have been no different "whatsoever" had he not been involved with the FBI and the
United States Attorney's office; that in his examination of AJL Gober never "went beyond that which
was necessary for an administrative examination of Andrew Jackson Life's financial condition"; that
the FBI and the United States Attorney's office instructed Gober "to conduct his examination as he
always had" and "to do precisely that which he would do in the normal course of any examination,
nothing more, nothing less and nothing different"; that Gober was never directed by the FBI or the
United States Attorney's office as to "what to do" or "what to look for or what they hoped to find,"
and the FBI and the United States Attorney's office "never even told Gober what their investigation
might concern, or what they might be interested in." None of these findings is clearly erroneous.
On appeal, Blocker challenges the district court's arguably implicit conclusion that Gober was
not a Government agent, correctly asserting that the evidence establishes that the FBI knew of and
acquiesced in Gober's audit of AJL's records and that Gober intended to assist the FBI i n its law
enforcement efforts. Blocker also argues that Gober's cooperation with the FBI was intended to
further his o wn pecuniary interests by virtue of the compensation he received from the FBI. See
Bazan, 807 F.2d at 1203. We need not decide whether Gober was acting as an agent of the Federal
Government because even assuming, arguendo, that Gober was not only an agent of MID but was
also acting on behalf of the FBI, we believe that no Fourth Amendment violation occurred as Gober's
inspection did not intrude upon any reasonable expectation of privacy that AJL or Blocker might have
had in AJL's records.
It is settled law that the Fourth Amendment applies not only to searches and seizures of
private homes, but also to searches and seizures of commercial premises. Marshall v. Barlow's, Inc.,
436 U.S. 307, 311-13, 98 S. Ct. 1816, 1820, 56 L. Ed. 2d 305 (1978); See v. City of Seattle, 387 U.S.
541, 546, 87 S. Ct. 1737, 1741, 18 L. Ed. 2d 943 (1967). Under certain circumstances, however,
warrantless searches on commercial property may be reasonable within the meaning of the Fourth
Amendment. See New York v. Burger, 482 U.S. 691, 700-03, 107 S. Ct. 2636, 2643-44, 96 L. Ed. 2d
601 (1987). Specifically, the Supreme Court has recognized an exception to the warrant requirement
for searches of "closely" or "pervasively" regulated industries,5 provided three criteria are met:
"First, there must be a "substantial' government interest that informs the regulatory scheme
pursuant to which the inspection is made.... Second, the warrantless inspections must be
"necessary to further [the] regulatory scheme.' ... Finally, "the statute's inspection program,
in terms of the certainty and regularity of its application, [must] provid[e] a constitutionally
adequate substitute for a warrant.' " Id. at 702-03, 107 S.Ct. at 2644 (citations omitted)
It is undisputed that Gober did not have a warrant to inspect AJL's records; however, his
audit was conducted pursuant to a state administrative scheme under Miss.Code Ann. § 83-1-25
(1972).6 Blocker does not argue on appeal that the Mississippi statute fails to meet the requirements
5
The threshold requirement, of course, is that the governmental regulation of the industry in
question must be "close" or "pervasive." Burger, 482 U.S. at 702-703, 107 S.Ct. at 2644. For
this purpose, a regulation is pervasive if "the regulatory presence is sufficiently comprehensive and
defined that the owner of [the] commercial property cannot help but be aware that his property
will be subject to periodic inspections undertaken for specific purposes." Id. at 705 n. 16, 107
S. Ct. at 2645 n. 16 (quoting Donovan v. Dewey, 452 U.S. 594, 600, 101 S. Ct. 2534, 2539, 69
L. Ed. 2d 262 (1981)).
6
Miss Code Ann. § 83-1-25, at the time of Gober's examination of AJL, provided, in relevant
part:
"The Commissioner of Insurance shall carefully examine the affairs of each
domestic company as to its financial ability and condition as often as once in three
(3) years. He shall also make an examination of such company whenever he deems
it prudent to do so, or upon the request of five (5) or more of the stockholders,
policyholders, creditors, or other persons pecuniarily interested therein.... Such
examination shall be made by the commissioner, or by his accredited
representatives, and such companies shall pay the proper charges incurred in such
examination, including the expense of the commissioner or his accredited
representative...."
set forth in Burger.7 Instead, he complains that because Gober conducted the audit of AJL not only
in his capacity as an agent of MID, but also on behalf of the FBI, Gober's inspection went beyond the
scope of his otherwise lawful authority under the Mississippi regulatory scheme so as to amount to
an invasion of Blocker's and AJL's Fourth Amendment rights. We disagree.
Neither Gober, the FBI, nor the United States Attorney's office had a hand in MID's decision
to audit AJL and, as the district court found, Gober would have audited AJL at the same time, in the
same manner and to the same extent regardless of whether t he FBI was involved. Once he was
assigned to MID to conduct the AJL audit, Gober deci ded, on his own, to report to the FBI any
evidence of insurance fraud discovered during his audit. Plainly, this was not a situation where the
FBI "trumped-up" a phony audit to covertly examine AJL's insurance records. Cf. United States v.
Tweel, 550 F.2d 297, 298 (5th Cir.1977) (explaining that the defendant was not some random,
unfortunate victim of a routine IRS audit, but instead was hand-picked by the Department of Justice
as the target of a criminal investigation). Rather, Gober was a bona fide MID auditor who conducted
an actual MID audit of AJL in accordance with the Mississippi regulatory scheme.8
The scope of Gober's MID audit of AJL was not in any way altered by his relationship with
the FBI. Gober went onto AJL's premises unaccompanied by any state or federal agents, and
inspected AJL's records in a manner completely consistent with any routine MID audit. Gober did
not use the audit to "conduct a general search for incriminating materials." Lewis v. United States,
7
Blocker did argue to the district court, in his motion to suppress, that Gober's inspection of
AJL's records violated the warrant requirement to the Fourth Amendment because the Mississippi
statute was not constitutionally sufficient to serve as a substitute for a search warrant. The
district court rejected this argument, concluding that "the scheme employed by the MID pursuant
to the statute did, in fact, "advise [Blocker] that the search [was] being made pursuant to the law
and ha[d] a properly defined scope, and it limit[ed] the discretion of [Gober].' " (Citations
omitted). On appeal, Blocker does not challenge the constitutionality of the statute under Burger.
8
That Gober went to the FBI before, instead of after, conducting his audit is a distinction
without a difference in our analysis. If Gober, without any prior contact with the FBI, had formed
the intention to turn over any evidence of insurance fraud found in his audit to federal or state
prosecutors—and one would certainly have to assume that an auditor would likely have that
intention—Gober's failure to disclose that intention to AJL or Blocker would not render the audit
a violation of AJL's or Blocker's Fourth Amendment rights, so long as his intentions did not in any
way interfere with the manner in which he conducted, or the scope of, his audit.
385 U.S. 206, 211, 87 S. Ct. 424, 427, 17 L. Ed. 2d 312 (1966). Instead, his inspection was "limited
to the purposes contemplated by the [consenting] suspect." United States v. Bosse, 898 F.2d 113,
115 (9th Cir.1990).
Furthermore, Gober's audit of AJL would have been made at the same time and place, and
in exactly the same manner and extent, had Gober not been also acting for the FBI. The FBI did not
implicitly or explicitly influence the course or form of Gober's examination. On the contrary, the FBI
repeatedly told Gober to conduct his audit as he always had, emphasizing "that he was to do precisely
that which he wo uld do in the normal course of any examination, nothing more, nothing less, and
nothing different." At no time did the FBI direct Gober on what to do or what to look for while
inspecting AJL's records. Crucially, Gober's audit was an actual, regular MID audit and Gober
looked in no place and at no document or thing, and discovered nothing, that he would not have
looked in or at or discovered had he had no contact with the FBI.9
Unquestionably, neither AJL nor Blocker had any reasonable expectation of privacy vis-a-vis
Gober's examination of AJL's records. See Jenkins, 46 F.3d at 456; see also Burger, 482 U.S. at
700-17, 107 S.Ct. at 2643-51 (persons who engage in pervasively regulated industries have a
diminished expectation of privacy). AJL and Blocker, as its president, knew that it and he were
subject to Mississippi's insurance regulatory scheme and that evidence of insurance fraud discovered
in an MID audit of AJL could be turned over to the police or prosecutorial authorities. Burger, 482
U.S. at 716, 107 S.Ct. at 2651 ("The discovery of evidence of crimes in the course of an otherwise
proper administrative inspection does not render that search illegal or the administrative scheme
suspect"). Although Blocker or AJL arguably would have a reasonable expectation of privacy as to
items on AJL's premises which are not covered by an MID audit, no such expectation of privacy
exists as to items covered by the instant audit, which is all that is in issue here. Gober was authorized
by statute and by Blocker to search AJL's records for, inter alia, evidence of insurance fraud—which
9
We might well have reached a different conclusion if, for example, there was evidence that
Gober had conducted his audit differently due to his relationship with the FBI or if, instead of
Gober, an FBI agent falsely claiming to be an MID inspector had conducted a purported "MID
audit" of AJL.
is exactly what he did. Neither Blocker nor AJL could reasonably expect that Gober would withhold
such evidence from the authorities.
Citing a handful of cases, Blocker contends that a government agent may not conduct a search
by misrepresenting the nature or scope of his governmental authority through fraud, deceit, or
trickery. See, e.g., United States v. Bosse, 898 F.2d 113, 115 (9th Cir.1990); SEC v. ESM
Government Securities, Inc., 645 F.2d 310, 317 (5th Cir.1981); United States v. Tweel, 550 F.2d
297, 299 (5th Cir.1977). Blocker's reliance on these government agent "deception" cases, however,
is misplaced.
In Bosse, the defendant (Bosse) was a firearms dealer who had an application pending for a
state license to buy and sell machine guns. As part of the license application process, Dunkin, an
agent from the California Department of Justice, inspected Bosse's home and surrounding premises
with Bosse's consent. Accompanying Dunkin was Rusin, a federal Alcohol, Tobacco and Firearms
(ATF) agent, who did not identify himself to Bosse as an ATF agent. The Ninth Circuit held that
Dunkin made "a deliberate misrepresentation" of Rusin's purpose and status to Bosse. Id. at 115.
The district court concluded that observations by Rusin may have been the basis for the subsequent
search warrant for Bosse's home, and accordingly granted Bosse's motion for new trial.
The Ninth Circuit vacated the district court's order and remanded. It held that the district
court's findings were "inconclusive ... with respect to the effect of Rusin's illegal entry and search on"
the "decision to seek the warrant." Id. at 116. It further stated that Bosse's Fourth Amendment
rights would have been violated if information gathered by Rusin during the inspection was used to
obtain the search warrant. Whether or not Rusin's "search" disclosed matters which Dunkin's did not
is not clear from the opinion. The court opined that "a government agent [may not] gain access to
records which would otherwise be unavailable to him by invoking the private individual's trust in his
government, only to betray that trust." 898 F.2d at 115 (quoting ESM Government Securities, Inc.,
645 F.2d at 316).
In the case at bar, Gober did not use his status as a MID auditor to gain access to records that
he had no right to inspect. On the contrary, Gober had every right to examine AJL's records, as
Mississippi law required Blocker to open AJL's files to Gober in order to stay in business. Further,
the ATF agent in Bosse, who was allegedly responsible for the warrant, was not authorized to
conduct a state inspection. To that end, Bosse could have excluded the ATF agent from his shop had
he wanted. Here, neither AJL nor Blocker could have prevented an audit by MID, even if they were
expressly informed by MID that if the audit uncovered evidence of any criminal activity, the auditor
would report it to the authorities.10
For similar reasons, Tweel does not support Blocker's argument. In Tweel, the Organized
Crime and Racketeering Section of the Department of Justice (DOJ) specifically requested the
Internal Revenue Service (IRS) to conduct an audit of defendant Tweel. To discover whether his
client was involved in a criminal investigation, Tweel's accountant asked the IRS agent whether a
"special agent" was involved in the investigation, to which the IRS agent replied that there was not.
Believing that the IRS was conducting only a routine civil audit, Tweel voluntarily presented his tax
reco rds to the IRS agent. The agent, in turn, created microfilm copies of the records and handed
them over to the DOJ. The Tweel court, in determining that the IRS agent's deception amounted to
a Fourth Amendment violation, recognized that although the IRS agent had no affirmative duty to
warn Tweel that the investigation might result in criminal charges, the agent could not intentionally
mislead Tweel. 550 F.2d at 299-300; see also ESM Government Securities, 645 F.2d at 315.
In this case, not only has Blocker failed to demonstrate that either he or AJL was ever
intentionally or knowingly misled about the purpose of Gober's audit,11 he has failed to show that
either he or AJL was misled at all. At all times relevant, Blocker and AJL were under the impression
that Gober was conducting a regular triennial MID audit—which is precisely what Gober was doing
10
The Bosse court also found important the fact that the ATF agent accompanied the state
inspection agent "not for the purpose of assisting in the state licensing inspection, but rather to
further [his own] investigation into possible federal firearms violations." Id. at 115. Here, the
limited purpose of Gober's inspection was to conduct a state insurance audit.
11
Tweel requires defendants to bear the burden of showing that an IRS agent abused the
public's trust by "materially misrepresent[ing] the nature of the inquiry." 550 F.2d at 299 (quoting
United States v. Prudden, 424 F.2d 1021 (5th Cir.), cert. denied, 400 U.S. 831, 91 S. Ct. 62, 27
L. Ed. 2d 62 (1970); see also United States v. Caldwell, 820 F.2d 1395, 1399 (5th Cir.1987)
(requiring a defendant to "show by clear and convincing evidence that the IRS agents made
material misrepresentations about the nature of the inquiry") (emphasis in original).
and did. There was no deception or misrepresentation to Blocker or AJL as to the scope or purpose
of the audit. In Tweel there was no genuine civil audit of the kind represented; the only audit was
a criminal audit specially ordered for this particular taxpayer, and falsely represented as a routine civil
audit. See id. at 298 ("what [IRS agent] Miller did not disclose was that this audit was not a routine
civil audit to which any taxpayer may be subjected from time to time. This audit was conducted at
the specific request of the Organized Crime and Racketeering Section of the Department of Justice").
Here, Gober's audit was an MID audit, and it would have been conducted of AJL by Gober at the
same time, for the same purpose, in the same manner and to the same extent, if the FBI had had no
involvement. The FBI did not bring about the audit or anything done or discovered therein; all that
was pure MID.
As discussed at length above, Gober at no point exceeded the scope of his authority under
the Mississippi statute, as he examined only those records that his state inspection powers allowed
and only those that he would have examined had the FBI not been involved. In sum, we conclude
that Gober's audit of AJL's records did not violate AJL's or Blocker's rights under the Fourth
Amendment. MID had a right to make its triennial audit of AJL, and it did so through Gober, who
was unquestionably its legitimate agent for that purpose; Gober looked for, looked at, and
discovered only that which was appropriate for his MID audit and which he would and should have
anyway in the course of his MID audit had there been no FBI involvement. Neither AJL's nor
Blocker's reasonable expectations of privacy were invaded by Gober's audit or what was discovered
in the course thereof. Thus, the district court correctly denied Blocker's motion to suppress.
II. SUFFICIENCY OF THE EVIDENCE
Blocker next argues that the evidence is insufficient to sustain his convictions for mail fraud
and bank fraud. We review challenges to the sufficiency of the evidence to determine whether a
rational trier of fact could have found that the Government proved the essential elements of the
offense charged beyond a reasonable doubt. United States v. Jimenez, 77 F.3d 95, 97 (5th Cir.1996).
All the evidence admitted at the trial must be viewed in the light most favorable to the verdict,
accepting all credibility choices and reasonable inferences that tend to support the verdict. Id.
A. MAIL FRAUD
To prove a violation of the mail fraud statute, 18 U.S.C. § 1341, the Government must prove
beyond a reasonable doubt that there was (1) a scheme or artifice to defraud, (2) specific intent to
commit fraud, and (3) use of the mails for the purpose of executing the scheme to defraud. United
States v. Shively, 927 F.2d 804, 813-14 (5th Cir.), cert. denied, 501 U.S. 1209, 111 S. Ct. 2806, 115
L. Ed. 2d 979 (1991). In regard to the third element, Blocker stipulated at trial that all of the
documents named in the mail fraud counts (1-18) were sent through the United States mail.
As previously set forth, Blocker and White were charged with aiding and abetting each other
in defrauding the policyholders, investors, shareholders, and regulatory agencies of the Andrew
Jackson Group of Insurance Companies: AJL (owned by Blocker); Andrew Jackson General
Insurance Company; and Andrew Jackson Casualty Insurance Company. The indictment charged
that Blocker and White engaged in deceptive practices to continue to receive insurance premiums and
investments at a time when the companies involved were insolvent or impaired. This Court has
recognized that a defendant commits fraud when he makes a company appear solvent when it is not.
Howell Hydrocarbons, Inc. v. Adams, 897 F.2d 183, 192 (5th Cir.1990).
More specifically, the Government's theory was that the false information in the various
letters and brochures that were mailed helped to bring in money from the policyholders and investors,
who would not have sent the money had they known the precarious financial situation of the Andrew
Jackson Group. Further, the Government's theory was that mailing the quarterly financial statements
that contained false information was an effort to avoid regulatory act ion, thereby allowing the
companies to continue collecting premium income from the policyholders. Blocker argues that the
Government did no t present sufficient evidence to allow a reasonable jury to find that AJL was
insolvent.
The Government introduced overwhelming evidence showing that Blocker and White
structured transactions and shifted assets among the companies to make AJL appear to have surplus
capital when, in fact, AJL was in such hazardous financial condition that MID placed it on the "first
priority" list to be examined. Viewed in the light most favorable to the verdict, the evidence showed
that Blocker and White were engaged in a scheme that involved the diversions of millions of dollars
in premiums and income from the insurance companies to two high risk companies. Approximately
forty million dollars were diverted to Southern Capital Holdings (SCH), a telecommunications
venture, and Belwood, a furniture manufacturing company that was bought out of bankruptcy. These
two companies received funds from the insurance companies through other White-owned companies
such as Guardian Trust, a depository institution that held the monies of the three insurance companies
in exchange for promises to pay.
Most all the funds held by Guardian Trust originated from insurance company deposits.
Guardian Trust then invested in Acceptance Corporation. In return for the deposits or investments,
Acceptance Corporation gave Guardian Trust an open-ended note receivable. Acceptance
Corporation in turn loaned money to Andrew Jackson Corporation in exchange for a promissory
note. Ultimately, Andrew Jackson Corporation loaned money to Belwood and SCH. Belwood and
SCH never repaid any of the debts with their own money. Those two companies had to service their
debts by borrowing more money to make interest payments that came due.
Although AJL's records reflected that it had money in demand accounts with Guardian Trust,
the evidence established that cash monies did not support the journal entries. Jimmy Blissett, the
chief examiner for MID, testified that Blocker admitted to him that AJL's demand account at
Guardian Trust could not be liquidated. That demand account was supposed to be AJL's most liquid
investment.
The Government also introduced overwhelming evidence that the companies and their
investments were interdependent. As previously set forth, in 1990, MID informed Blocker and White
that there was a problem with the affiliation among the White-owned companies and their
interdependent investments. Blocker purchased AJL after MID voiced its concern regarding the
affiliation problem. Even after Blocker's purchase of AJL, the accounting entries for the companies
(including AJL) remained at the same physical location, and the companies were treated essentially
as if there was one operation. Indeed, Blocker ran the operation by instituting a cash management
system that he described as a "one-company concept."
At Blocker's direction, in March 1991, payment of the insurance policyholders' claims were
delayed because of a cash crunch. Lou Pearce, secretary-treasurer at Guardian Trust, described the
financial situation as follows:
"I don't specifically know which checks were held, but I know we withheld some checks at
Mr. Blocker's direction. I would tell him what we had to pay. Each morning I would go to
his office and we'd go over the needs for the day, of the requests that had been made, and we
would disburse what we had to, depending on what we had in the bank and how urgent those
needs were."
Pearce further testified that the "three insurance companies and some other various
companies, all their money would go into what we call CI or demand accounts." "All the money from
the insurance companies went into Guardian Trust Company. They in turn disbursed the money out
as it was needed to whomever." For example, SCH would request particular amounts of cash or
venture capital, and Blocker would approve the disbursements. During October of 1991, the
following disbursements of cash were made to SCH: $110,000 on October 7; $90,000 on October
11; $70,000 on October 14; $709,000 on October 21; $208,000 on October 25; and $405,000 on
October 28.
Richard Newman, a securities analyst at the Securities Valuation Office at the NAIC, testified
that his 1991 evaluation "determined that the holdings of [Belwood and SCH] were severely impaired
and that as a result of this impairment it worked its way through the entire holding company structure
of all of these companies and impacted them all." In other words, "these companies didn't have any
equity."
Further, at the end of January 1992, which was prior to the FBI search, Blocker, when
questioned regarding the financial status of the companies, responded "it's over with" and admitted
that he was out of options. Thus, despite Blocker's arguments to the contrary, there was sufficient
evidence to believe that AJL and the other insurance companies were impaired or insolvent as a result
of the diversion of the insurance premiums to SCH and Belwood.
Blocker next argues that the Government failed to prove that he intended to defraud. "Intent
to defraud requires an intent to (1) deceive, and (2) cause some harm to result from the deceit."
Jimenez, 77 F.3d at 97 (citation omitted). A defendant has the intent to defraud if he acts knowingly
with the specific intent to deceive for the purpose of causing pecuniary "loss to another or bringing
about some financial gain to himself." Id. Blocker contends that because there was no proof of
insolvency, there can be no proof that he knew of the insolvency. Blocker's contention fails because,
as stated above, there is sufficient proof that the companies were insolvent. Moreover, Blocker's
extensive knowledge of these companies as an accountant and his control over day-to-day operations
provided a sufficient basis from which a reasonable juror could infer his intent to defraud.
The counts of convictions for mail fraud are based on mailing the following: advertising in
the form of letters and brochures to policyholders and investors; annuity contracts; an annual report
to a shareholder; and quarterly statements to agencies of various states responsible for regulating the
insurance industry.
In regard to counts 1, 5, and 6, the brochures provided, among other things, that one of the
company's greatest strengths was its investment results and that its holdings were investment grade
and that its bonds were rated by the NAIC and found acceptable by various departments. One letter
promised "100% guarantee" on the investment.12 Another letter provided as follows: "Our 130
million dollars in assets are primarily invested in Mississippi companies with a long track record of
profitability." There was ample evidence showing that these representations were false and
misleading. We hold that the evidence clearly is sufficient to sustain the convictions based on the
mailings to the policyholders.
In regard to the counts (2-4, 7-12, 15-17) of conviction based on the mailing of the quarterly
statements to the various state regulators, Wanda Smith, a CPA who was an accountant for AJL,
testified that she prepared the 1991 quarterly statements. She further testified that millions of dollars
in assets that were listed as performing on the quarterly statements were actually not performing, i.e.,
12
Blocker argues that he had nothing to do with the advertising campaign and that he had no
knowledge of the letters because his signature on the letters was computer-generated. This
argument will afford him no relief. John Gough, who had been an officer and director of several
of the White-owned companies, testified that he heard Blocker "tell John Bethany to get the
advertising program cranked up." He also testified that Blocker was present at meetings in which
the advertising campaign was discussed in the context of attempting to revive the insurance
companies. The jury was free to reject Blocker's testimony that he had no knowledge of his
signature being used.
not generating income. Additionally, the statements did not provide that a $200,000 dividend
($50,000 each quarter) had been declared to Blocker. The evidence is sufficient to sustain Blocker's
convictions for defrauding the state regulators.
To sustain the convictions in counts 13 and 14 based on the mailing of the annuity contracts
to John Burris and James Moulds, the Government argues that Burris and Moulds purchased those
contracts in reliance on advertisements in December 1991. However, i n the court below the
Government argued that those two counts did not "have anything to do with the mailout that
occurred in December." Further, in response to the district court's inquiry regarding the
Government's theory of the case on those counts, the Government responded that the mails were used
to deliver the annuity contracts at a time when Blocker should not have been seeking business.13 In
any event, our recent opinion in United States v. Krenning, 93 F.3d 1257 (5th Cir.1996) is controlling
with respect to counts 13 and 14. There, under similar circumstances, we affirmed a mail fraud
conviction reasoning that "[w]ithout these mailings to the insureds, ... the Defendants would ... not
have been able to continue selling worthless insurance policies, the financial object of their scheme."
Id. at 1263. We therefore concluded that there was sufficient evidence to allow the jury to find that
the mailings were in furtherance of the defendants' scheme to defraud. Likewise, in the case at bar,
the annuity contracts were necessary and directly related to the procurement of additional funds with
which to continue the fraudulent scheme. We must conclude that the evidence was sufficient to show
that mailings of the contracts were in furtherance of Blocker's scheme to defraud.
On the other hand, we find the evidence insufficient to sustain count 18, which is based on
the mailing of the 1990 annual report of AJL to Susan Allenburger (White's sister) and her husband,
David Allenburger. To support that conviction, the Government argues that the 1990 annual report
13
The Government also made the following argument to the district court:
"It's the rest of the scheme dealing with misrepresenting the true
value—misrepresenting the financial condition of the companies and ultimately
goes back to the quarterly statements. They mailed out quarterly statements that
allowed them to continue to remain in business to do things like the annuity
contract. The theory of the prosecution is not just the December 6th mailing. It's
a lot of other mailings."
"painted a rosy picture of the companies in which Allenburger had an interest" even though Blocker
knew it was false. The Government, however, does not specify the false information contained in the
report, and we have been unable to determine from the record what specific evidence was false or
fraudulent. We find the Government's theory too tenuous to sustain the conviction based on the
mailing of AJL's 1990 annual report. We therefore must conclude that the evidence is insufficient to
sustain the fraud conviction based on the mailing of the 1990 annual report.
B. BANK FRAUD
Blocker also argues that the evidence is insufficient to prove his two convictions for bank
fraud. To prove a violation of the bank fraud statute, 18 U.S.C. § 1014, the Government must prove
beyond a reasonable doubt that the defendant: "(1) made a "false statement or report' and (2) did so
"for the purpose of influencing in any way the action of' a federally insured institution engaged in a
lending activity." United States v. McDow, 27 F.3d 132, 135 (5th Cir.1994) (quoting United States
v. Bowman, 783 F.2d 1192, 1197 (5th Cir.1986)).
Blocker was charged with aiding and abetting White in the two counts of bank fraud. To
uphold a conviction for aiding and abetting under 18 U.S.C. § 2, the Government must prove that
the defendant associated with a criminal venture, purposefully participated in the criminal activity, and
sought by his actions to make the venture successful. United States v. Polk, 56 F.3d 613, 620 (5th
Cir.1995) (citations omitted). A defendant associates with the criminal venture if he shares in the
criminal intent of the principal. United States v. Jaramillo, 42 F.3d 920, 923 (5th Cir.), cert. denied,
--- U.S. ----, 115 S. Ct. 2014, 131 L. Ed. 2d 1013 (1995). A defendant participates in the criminal
activity if he has acted in some affirmative manner designed to aid the venture. Id. Mere presence
and association are insufficient to sustain a conviction for aiding and abetting. Jaramillo, 42 F.3d at
923.
Count 19 of the indictment charged Blo cker with aiding and abetting White in submitting
White's personal financial statement that contained false information to the Bank of the South for the
purpose of obtaining a $100,000 loan in December 1991. White's financial statement provided that
he owned $15,629,264 in stock in Guardian Trust Company and Andrew Jackson Corporation. The
testimony at trial, however, indicated that the stockholders' equity in those two corporations was "a
negative number."14
Blocker argues that the loan was a personal loan for Dan White and that he cannot be held
responsible for the information in the financial statement. The Government introduced the following
evidence that demonstrated that Blocker aided and abetted White in committing fraud against the
Bank of the South. Blocker submitted the loan application to the president of Bank of the South,
Ralph Olier. Blocker requested the loan explaining that "they" had a cash flow problem and needed
some short-term help. Belwood received the proceeds of that loan. Olier testified that Blocker was
required to guarantee the loan because Blocker was "a participant or part of the flow from J. Dan
White and Mr. Blocker to Mr. Connerly [manager of Belwood]." Moreover, the evidence was
sufficient for the jury to infer that Blocker was aware of the misrepresentation contained in White's
statement15 and that he intended to further the criminal venture, i.e., making a false statement for the
purpose of influencing the bank's decision to make the loan. Under those circumstances, we do not
hesitate to find that Blocker aided and abetted White in committing bank fraud. The evidence is
sufficient to uphold Blocker's conviction on count 19.
Count 20 of the indictment charged Blocker with aiding and abetting White in falsely
representing to First National Bank of Vicksburg that the "mortgage loan between Belwood and
[AJL] and Guardian Trust was paid current with a history of regular and timely payments, when in
truth and fact the payments shown the bank were only bookkeeping journal entries made to create
an appearance of a non-default status, which entries, as the Defendants well knew, were unsupported
by actual cash payments." Blocker used Belwood's mortgage as collateral to secure a $2,000,000
loan for AJL.
14
Blocker argues that the financial statement provides that the investments are listed at its
"book" value rather than the "actual value." The evidence at trial demonstrated beyond a
reasonable doubt that the value of White's investments was so diminished that this figure falsely
represented his holdings and could only be asserted in an attempt to mislead and deceive. The
representation of value when no value exists is fraudulent.
15
Indeed, on cross examination, Blocker admitted that he knew "something about [White's
financial statement]."
At trial, the commercial lender who handled the loan testified that the only representation
made regarding the Belwood mortgage was that it was current. Blocker introduced checks written
by Belwood indicating that it was current on its mortgage payments. Blocker argues therefore that
the evidence did not establish that the payments were only journal entries. The Government responds
that "[t]he documents presented to the banks did not include how worthless the listed assets were.
Assets were claimed to be paid in a current manner when they were not, the Belwood and SCH loans
were supported only by additional borrowing and no real cash."
Our review of the record indicates that Belwood paid the mortgage payments and that the
mortgage was current. Although it is true that Belwood had to borrow the money to make the
mortgage payment s, we are not prepared to hold that having to borrow the money renders the
representation that the mortgage was current false. Accordingly, we reverse Blocker's conviction on
count 20.
III. JURY INSTRUCTION
Blocker argues that the district court erred in failing to instruct and submit the issue of
"materiality" on counts 19 and 20, the bank fraud counts. Because we reversed Blocker's conviction
on count 20, we need reach this claim only in regard to count 19.
At the time of trial, this Circuit's precedent dictated that materiality under 18 U.S.C. § 1014
was a legal determination to be made by the district court, notwithstanding that we also recognized
that materiality of a false statement was an element of the offense which the Government was
required to prove. United States v. Williams, 12 F.3d 452, 456 (5th Cir.1994); United States v.
Thompson, 811 F.2d 841, 843 (5th Cir.1987). In accordance with that precedent, the district court
instructed Blocker's jury that it "need not consider whether the false statement was a material false
statement, even though ... that language is used in the indictment. That is not a question for the jury
to decide." Subsequently, the Supreme Court held that materiality, an element of the offense, must
be submitted to the jury to be found beyond a reasonable doubt. United States v. Gaudin, --- U.S.
----, 115 S. Ct. 2310, 132 L. Ed. 2d 444 (1995).
Both Blocker and the Government argue that this claim should be reviewed for plain error.
We have previously reviewed unobjected to Gaudin-error claims for plain error. United States v.
Upton, 91 F.3d 677, 685-86 (5th Cir.1996); United States v. Jobe, 101 F.3d 1046 (5th Cir.1996).
We therefore will review the claim for plain error.
Under Fed.R.Crim.P. 52(b), this Court may correct forfeited errors only when the appellant
shows the following factors: (1) there is an error, (2) that is clear or obvious, and (3) that affects his
substantial rights. United States v. Calverley, 37 F.3d 160, 162-64 (5th Cir.1994) (en banc) (citing
United States v. Olano, 507 U.S. 725, 730-37, 113 S. Ct. 1770, 1776-79, 123 L. Ed. 2d 508 (1993)),
cert. denied, --- U.S. ----, 115 S. Ct. 1266, 131 L. Ed. 2d 145 (1995). If these factors are established,
the decision to correct the forfeited error is within the sound discretion of the court, and the court
will not exercise that discretion unless the error seriously affects the fairness, integrity, or public
reputation of judicial proceedings. Olano, 507 U.S. at 734-36, 113 S.Ct. at 1778. As this Court did
in Upton, supra, in the instant case we will assume that the first three factors of the Olano test have
been satisfied.
As set forth previously, count 19 is based upon the false statement in Dan White's financial
statement. "A false statement is material if it is shown to be capable of influencing a decision of the
institution to which it was made." Williams, 12 F.3d at 456. Ralph Olier, president of Bank of the
South, testified that Bank of the South requested White's current financial statement to obtain the
"most accurate information on Mr. White." Olier further testified that Bank of the South relied on,
among other things, White's financial statement when it approved the loan. There apparently was no
argument before the district court that the financial statement, if false, was not offered to influence
Bank of the South to loan $100,000. It could hardly be suggested that a financial statement of the
borrower would not be material to the decision to loan such a large sum of money. Indeed, Blocker
does not now argue that the financial statement was not material, only that the issue should have been
submitted to the jury.
In light of the record presented to us in this appeal, we cannot say that the Gaudin error
affected the fairness, integrity, or public reputation of these proceedings. Under these circumstances,
we will not exercise our discretion to correct the error in Blocker's conviction. Upton, 91 F.3d at
686.
IV. SENTENCING ISSUES
A. CALCULATION OF AMOUNT OF LOSS
Blocker challenges the district court's estimate of the amount of loss caused by the offense
conduct. He contends t hat he was not charged with rendering AJL insolvent but rather, he was
charged with operating AJL after it was already insolvent in such a way that would allow AJL to
continue to collect premiums from the policyholders. He argues that "the correct calculation for the
amount of loss would be whatever increased loss, if any, was caused by the continued operation of
[AJL] beyond the point it should have been closed down by state regulators." In other words, "this
would be the amount of actual loss at the time it was closed down less the amount of loss that would
have occurred if at the time the state regulators would have closed down [AJL] in the absence of [his]
alleged scheme to defraud."
Blocker challenges neither the loss estimate of $39,000,000 nor the district court's use of
"actual" loss. Instead, he argues that he is responsible for only part of that loss. Although he lists
certain monies he asserts should have been subtracted from the $39,000,000 figure, he does not offer
any calculation or the precise amount of loss to be attributed to his offense conduct. In the district
court, defense counsel informed the district court that his "overall position is there is no way you can
determine what the actual number is today." Defense counsel further stated that "[i]t's our position
we don't know—That's not an accurate number. We don't know what it is."
After hearing arguments of counsel, the court found as follows.
"It appears clear to the court that the loss is in excess of 20 million dollars,16 so that issue is
resolved against the defendant. The court will make a finding that the loss is approximately
39 million dollars, realizing that oftentimes the precise number is impossible to determine;
but a very competent CPA has given his attention to it, and study, and reached the conclusion
that that is the approximate amount; and the court will adopt that." (footnote added).
Similarly, in United States v. Stedman, 69 F.3d 737, 740-741 (5th Cir.1995), the appellants
argued that the amount of loss should be only the part for which their offense conduct was the cause
16
If the amount of loss for fraud was in excess of $20,000,000, but less than $40,000,000, the
increase in the offense level remains the same. § 2F1.1(b)(1)(Q) and (R).
because the bank was in financial trouble before they concealed information. They asserted some of
the loss was unavoidable. This Court rejected the defendant's argument, opining that "[t]he
impracticability of the course urged by [the appellants] is perhaps best demonstrated by their inability
to offer a reasonable figure for the loss." We explained that "[r]ealistically, no one can assess such
a thing precisely; and we refuse to ask sentencing courts to undertake such Herculean tasks or to
afford the benefit of the doubt to bank officers who engage in wrongful conduct." Id.
Likewise, in light of Blocker's inability to offer a precise amount of loss and the evidence to
support the district court's finding of loss, we find no error.
B. JEOPARDIZING SOUNDNESS OF FINANCIAL INSTITUTION
Blocker contends that the district court erred in increasing his offense level by four pursuant
to § 2F1.1(b)(6)(A), which provides for a such an enhancement if the defendant's offense substantially
jeopardized the safety and soundness of a financial institution.17 Blocker argues that this guideline
is inapplicable because the Government's case was posited on the theory that he knew that AJL was
statutorily impaired and insolvent when he took it over in 1989. He therefore argues that if AJL
already was insolvent, the scheme to forestall regulatory action in order to continue operations could
not have caused its insolvency. After examining the commentary to § 2F1.1, we are unpersuaded by
Blocker's argument.
The commentary to § 2F1.1 explains that an offense shall be deemed to have substantially
jeopardized the safety and soundness of a financial institution:
"if, as a consequence of the offense, [1] the institution became insolvent; [2] substantially
reduced benefits to pensioners or insureds; [3] was unable on demand to refund fully any
deposit, payment, or investment; [4] was so depleted of its assets as to be forced to merge
with another institution in order to continue active operations; or was placed in substantial
jeopardy of any of the above." U.S.S.G. § 2F1.1, comment. (n.15).
At the sentencing hearing, the district court found that:
"There is no question Mr. Blocker's offense behavior resulted in the ultimate downfall of AJL
and the subsequent need to place the company in rehabilitation and finally liquidation. It is
clear from investigative information that not only was AJL rendered insolvent but was also
17
Section 2F1.1(b)(6)(A) provides that "[i]f the offense substantially jeopardized the safety and
soundness of a financial institution ... increase by four levels. If the resulting offense level is less
than level 24 increase to level 24."
unable on demand to refund fully any deposit or investment and was also so depleted of assets
as to be forced to merge with another institution."
Clearly, under those facts, § 2F1.1(b)(6)(A) is applicable. Because Blocker has not shown that these
findings are clearly erroneous, his claim fails.
C. RESTITUTION
Blocker contends that he lacks the future ability to pay restitution in the amount of
$5,708,051 as ordered by the district court. He argues that the district "court made no findings as
to [his] present or future ability to pay this amount."
A district court's order imposing restitution is reviewed for abuse of discretion. United States
v. St. Gelais, 952 F.2d 90, 97 (5th Cir.), 506 U.S. 965, 113 S. Ct. 439, 121 L. Ed. 2d 358 (1992). We
have held that a defendant's indigency is not a bar to the district court ordering restitution. United
States v. Ryan, 874 F.2d 1052, 1054 (5th Cir.1989). Under 18 U.S.C. § 3663, a district court shall
consider the amount of loss sustained by the victims as a consequence of the offense, the financial
resources of the defendant, the financial needs and earning ability of the defendant, and any dependent
of the defendant. The court need not make specific findings, however, if the record provides an
adequate basis to support the restitution order. St. Gelais, 952 F.2d at 97.
During the sentencing hearing, the district court expressly stated that it had considered the
loss sustained by the victims, Blocker's financial resources as listed in the presentence report, and
Blocker's financial needs. The court then concluded that Blocker did not have the ability to pay a fine
and full restitution. The court therefore did not impose a fine but imposed partial restitution in the
amount of $5,708,051.
The record provides an adequate basis for the district court's decision. The presentence report
provides that Blocker has a degree in accounting and no dependents. Additionally, the report
provided that Blocker "stated on the personal financial statement that, conceivably, if he is able to
work, and does not go to jail, he could earn approximately $100,000 annually for t hese services."
Because the district court considered the factors set forth in the statute and the record supports the
court's findings, Blocker has not shown that the district court abused his discretion in imposing partial
restitution.
V. CONCLUSION
For the foregoing reasons, we REVERSE Blocker's convictions on count 18 and 20 and
AFFIRM the convictions on counts 1-17 and 19 and AFFIRM Blocker's sentence.18
BENAVIDES, Circuit Judge, concurring in part and dissenting in part:
I dissent only from the majority's decision to affirm the district court's denial of Blocker's
motion to suppress.
My view of this case can be summarized as follows: (1) Gober was an agent of the FBI; (2)
Gober searched AJL's records; (3) the FBI needs a warrant or an exception to the warrant
requirement to search; and (4) t here was no warrant and no exception was available to the FBI
because Blocker's implied consent to search under the Mississippi administrative scheme did not
encompass an FBI agent desirous of finding criminal activity. As a result, the Fourth Amendment was
violated, and the error was not harmless.
Blocker contends that Gober was acting as an agent of the FBI when Gober gathered the
evidence that resulted in his prosecution. As set forth by the majority, to make such a determination,
this Court, in the past few years, has assumed the adequacy of a test formulated by the Ninth Circuit
in United States v. Miller, 688 F.2d 652, 657 (9th Cir.1982): (1) whether the Government knew of
or acquiesced in the intrusive conduct; and (2) whether the private party intended to assist law
enforcement efforts or to further his own ends. E.g., United States v. Jenkins, 46 F.3d 447, 460 (5th
Cir.1995). Prior to applying the Miller test, this Court had opined that "[p]reknowledge and
acquiescence [of the government] make a search by a private party a search by the government."
United States v. Clegg, 509 F.2d 605, 609 (5th Cir.1975). Thus, "[a]ny evidence which, for Fourth
Amendment reasons, would have been excluded had it been gathered by the government pro se
would, of course, have to be excluded if gathered by the only nominally private party." Id. We
explained that the evidence would be excluded to deter the Government from knowingly using a
private party to do that what it is prohibited from doing. Id.
18
All the sentences were concurrent and nothing indicates that the convictions on counts 18
and 20 affected the sentences or the guideline ranges on the other counts.
In the case at bar, the district court did not cite the above case law or any other authority in
its discussion regarding whether Gober was an agent of the FBI. The district court did opine,
however, that the following facts were most important to its conclusion that Gober was not an agent:
Gober was counseled that he was to conduct his examination as he always had; that is, it was
emphasized that he was to do precisely that which he would do in the normal course of any
examination, nothing more, nothing less and nothing different. And Gober testified credibly
that the fact of his relationship with the FBI did not influence the course of his examination
or affect the form of his examination. He conducted his examinations the same way after he
commenced his relationship with the FBI as he had before. In Gober's words, his examination
"would have been no different whatsoever" had he not been involved with the FBI. Indeed,
there is no proof that Gober ever went beyond that which was necessary for an administrative
examination of Andrew Jackson Life's financial condition. Gober and Agent Breedlove also
testified quite convincingly that no one with the FBI or the United States Attorney's office
ever directed Gober as to what to do. They never told him what to look for or what they
hoped to find. In fact, they never even told Gober what their investigation might concern, or
what they might be interested in. Further, it is uncontroverted that Gober received his
assignments from the MID and neither he, nor the FBI or United States Attorney's office had
any control in directing him to any particular company, including Andrew Jackson Life.
Finally, though Gober received compensation from the FBI, it is clear that the compensation
was for his time away from work and from his family, and not for his "services" or for the
information he provided.
The district court's conclusion that Gober was not an agent is largely based on the finding that
Gober's actions were not directed or influenced by the FBI. Simply because he conducted the
examination as he always had does not answer the question at issue.1 The relevant inquiry is (1)
whether the Government knew of or acquiesced in the intrusive conduct; and (2) whether the private
party intended to assist law enforcement efforts or to further his own ends.
In regard to the first factor, the evidence at the hearing established that, prior to examining
the records of AJL, Gober contacted the Government and agreed to provide any evidence of criminal
activity he discovered. Thus, it is clear that the Government knew about the intrusive conduct, i.e.,
the examination of the insurance company's records. Indeed, the district court found that "Gober
agreed [with the Government] that if he were to again encounter what he believed to be evidence of
criminal conduct by Mississippi insurers or MID, he would furnish such information to the FBI." As
such, the Government knew of and acquiesced in the intrusive conduct.
The next question is whether Gober intended to assist law enforcement efforts or to further
1
If the FBI had directed Gober's actions, he undoubtedly would have been acting as an agent of
the FBI.
his own ends. In regard to this factor, the district court made findings that would support either
conclusion. The district court found that "from the beginning of their [Agent Breedlove and Gober's]
relationship, Gober was desirous of providing the FBI with any evidence of criminal activity which
he might uncover during the course of his examinations and, in fact, that is what he agreed to do."
This finding unquestionably indicates that Gober intended to assist law enforcement efforts.
However, the district court also found that "Gober's purpose at Andrew Jackson Life was not to
search for evidence of criminal activity, either as an agent of the state government or the federal
government. Instead, his purpose was to perform a financial examination of AJL in his capacity as
an examiner for MID, and that is precisely what he did." Curiously, the court found that Gober
desired to (and agreed to) provide the FBI with any evidence of criminal activity discovered during
the examination but that his purpose was not to search for evidence of criminal activity.2
After a careful review of the suppression hearing, it is clear that Gober both intended to assist
law enforcement and further his own interests. Gober testified regarding how he "would repeatedly
try to get [the FBI agents] to make comments or offer direction." Indeed, he became frustrated after
the agents refused to offer him the requested guidance. Additionally, Gober candidly admitted that,
at the time he was conducting the examination of AJL and its affiliates, although he did not know
whether the Government later would hire him as a contract employee, he "was hoping that" would
happen.3 Though part of Gober's motivation in reporting the alleged criminal activity was to shield
himself from any allegations of wrongdoing, see maj. op. at 1576, his actions went far beyond that.
2
In a footnote, the district court sought to clarify this finding, opining that Gober did not agree
to "look for" evidence but agreed only that he would continue to provide information discovered
during his examinations that might suggest criminal activity.
3
Gober was no longer employed by MID after the search warrant was executed on February 7,
1992. Indeed, three days after the search warrant was executed, Gober began working as a
contract employee for the FBI. Subsequent to that date, the FBI paid Gober a total of $35,000
"to analyze documents, review documents as it relates to insurance accounting." At the end of his
contract with the FBI, according to Gober, he "met with the U.S. Attorney's office and offered
services to them to—[he] had previously with the FBI looked at documents to determine
relevancy and so forth, and I was going to, if they needed me, assist the U.S. Attorney's office in
continued analysis and explaining the relevancy of those documents to an insurance company's
collapse." Ultimately, Gober received $78,280 for the services he rendered to the United States
Attorney from October 13, 1992 to May 6, 1994. At the time of the suppression hearing, Gober
still was providing services to the United States Attorney at the rate of $30 per hour.
In light of Gober's testimony, it is most apparent that he intended to help the FBI in their
investigation.
In United States v. Bazan, 807 F.2d 1200, 1203 (5th Cir.1986), cert. denied, 481 U.S. 1038,
107 S. Ct. 1976, 95 L. Ed. 2d 816 (1987), this Court encountered a somewhat similar scenario
involving mixed motives on the part of the alleged Government agent. In that case, the private party
may have had a personal reason to conduct the search in addition to any desire he may have had to
assist law enforcement officers. 807 F.2d at 1204. We determined that it was unnecessary to
ascertain the private party's "true" motive for entering the ranch because "an informant's personal
motive to conduct a search is not at all inconsistent with an intention to aid a police investigation."
Id. We explained that when the Government does not offer "any form of compensation for [the
informant's] efforts, personal motives in fact are likely to be mixed with the desire to help authorities."
In conclusion, this Court held that when the Government has not offered any form of compensation,
has not initiated the idea of searching, and lacked specific knowledge that the informant intended to
search, the informant has not acted as a Government agent. Id. In the instant case, although the
Government did not initiate the idea that Gober would conduct the search,4 the Government had
specific knowledge that Gober would conduct the search, and the Government compensated Gober
for his time.
Our cases indicate that compensation is an important consideration in determining whether
the private party became an agent of the Government. See United States v. Ramirez, 810 F.2d 1338,
1342 (5th Cir.), cert. denied, 481 U.S. 1072, 107 S. Ct. 2469, 95 L. Ed. 2d 877 (1987); Bazan, 807
F.2d at 1204. In the case at bar, this factor is rather troublesome in that the district court found that
"though Gober received compensation from the FBI, it is clear that the compensation was for his time
away from work and from his family, and not for his "services' or for the information he provided."
4
The fact that the Government did not initiate the contact with Gober does not preclude the
determination that Gober was acting as an agent of the United States Government. "[I]t is
"immaterial' whether the government originated the idea for a search or joined it while it was in
progress. United States v. Knoll, 16 F.3d 1313, 1320 (2nd Cir.), cert. denied, --- U.S. ----, 115
S. Ct. 574, 130 L. Ed. 2d 490 (1994) (citing Lustig v. United States, 338 U.S. 74, 69 S. Ct. 1372,
93 L. Ed. 1819 (1949) (plurality)).
Nevertheless, it is undisputed that Gober received compensation from the Government. The broad
language in Bazan that "the government has not offered the informant any form of compensation for
his efforts" could be read to mean that any form of compensation (whether for services or not) would
be sufficient to weigh as a factor in favor of the conclusion that the party was acting as an agent.5
In any event, in light of the evidence adduced at the hearing, I am persuaded that the court's finding
that Gober was not compensated for his services or for the information he provided is clearly
erroneous.
The evidence established that Gober received $4,8916 from the FBI for his time spent prior
to February 7, 1992, the date the search warrant was executed. Gober testified that this money was
not for "services," but rather for his "time." Gober explained as follows:
Prior to February 7 any amounts that I received—I think "services" is an improper term. If
I had to miss time from work as the investigation grew—there was more and more time
needed of me. If I was asked to spend a great deal of time with them, I would say, "The only
way can I [sic] do it and not be away from my family the whole time is for me to take a half
day off from my work or take one day off." If I did so, I wasn't paid because, as you said
earlier, I was on contract. So if I took a half day off, I would miss a half day's work. All they
did was reimburse me for exactly what I missed by not being at work. It was—services, I
guess, is the improper term.
The FBI paid Gober $37.50 an hour, which is precisely the rate he was paid for his contract
work for MID. Although the district court found that Gober was paid for time away from work and
from his family (and not for his services), there was no reason for the United States Government to
pay $37.50 an hour to Gober, a contract employee of MID, but for the information and services that
he provided the Government. Gober undoubtedly was compensated for his services and for the
information he provided.
In sum, the evidence clearly demonstrates that Gober intended to assist law enforcement, was
5
Of course, the Government may pay, for example, a witness's expenses incurred in traveling
to testify, and such compensation would not be a factor in determining whether the person was an
agent of the Government.
6
The district court stated that Gober was paid approximately $4100. During the hearing,
Agent Breedlove initially estimated that Gober had been paid $4100 for his time prior to February
7, 1992. After looking at the FBI receipts, however, Agent Breedlove corrected his testimony
and stated that the figure was $4,891. Gober also testified that he received approximately $4,800
from the FBI for that time period.
compensated for his time spent providing the Government with evidence, and the Government knew
of and acquiesced in the search.7 In fact, the FBI most certainly encouraged Gober by providing him
with a device for the surreptitious recording of conversations he had with Blocker. And Gober
recorded all conversations to satisfy the Government's concerns regarding allegations of selective
recording. The Government should "not be permitted to stand by or blink their eyes and accept the
benefit" of Gober's activities. United States v. Mekjian, 505 F.2d 1320, 1328 (5th Cir.1975)
(explaining that the evidence was admissible because the Government had not encouraged or
cooperated with the private individual conducting the search). Based on this Circuit's precedent and
the factors employed by the Ninth Circuit in Miller,8 I conclude that Gober was acting as an agent
of the Government.9
On the other hand, the majority opines "that [w]e need not decide whether Gober was acting
as an agent of the Federal Government because even assuming, arguendo, that Gober was not only
an agent of MID but was also acting on behalf of the FBI, we believe that no Fourth Amendment
violation occurred as Gober's inspection did not intrude upon any reasonable expectation of privacy
that AJL or Blocker might have had in AJL's records." Maj. op. at 1579-80.10 Although the majority
7
Indeed, the district court found that Gober had a preexisting cooperative relationship with the
Government, and, as set forth previously, the Government had actual knowledge that Gober was
searching AJL's records and furnishing evidence to the FBI.
8
I note that whether the Miller test or our earlier precedent, Clegg, supra, is used, I come to
the same conclusion that Gober was acting as an agent of the Government.
9
Although admittedly an appellant has a difficult burden of showing that the district court
clearly erred, it is not insurmountable. See Jenkins, 46 F.3d at 460 (holding that the district court
clearly erred in finding that the private party was acting as an agent of the Government).
10
The majority opines that the district court's conclusion that Gober was not a Government
agent is "arguably implicit." Maj. op. at 1579. I do not read the district court's conclusion that
Gober was not an agent of the Federal Government to be implicit. The Government
acknowledges in its brief that the district court found that Gober was not an agent of the FBI.
The district court recognized that Blocker's "primary contention ... is that Gober operated in
cooperation with, and effectively as an agent for the FBI, using his authority as a financial
examiner for the MID as a pretext to gain entry to the premises of [AJL] and access to the
financial documents of that company...." (emphasis added). The district court subsequently
stated that it was "persuaded that Gober's purpose at [AJL] was not to search for evidence of
criminal activity, either as an agent of the state government or the federal government. "
(emphasis added). In any event, assuming it was an implicit conclusion, I would find it clearly
erroneous.
expressly states that it does not determine whether Gober was acting as an agent of the FBI, it agrees
"that the evidence establishes that the FBI knew of and acquiesced in Gober's audit of AJL's records
and that Gober intended to assist the FBI in its law enforcement efforts." Maj. op. at 1579. That,
of course, satisfies the Miller test that this Court has been applying to determine whether a person
has acted as an agent of the Government.
Having determined that Gober was acting as an agent of the FBI, and recognizing that the
Fourth Amendment applies to commercial premises, Marshall v. Barlow's, Inc., 436 U.S. 307, 98
S. Ct. 1816, 56 L. Ed. 2d 305 (1978), I believe that Gober must either have a warrant to search AJL
or an exception to the warrant requirement must apply. It is undisputed that Gober did not have a
warrant. Instead, he was searching pursuant to an established exception to the warrant requirement
for administrative inspections. By engaging in a business that is heavily regulated, Blocker "in effect
consent[ed]" to the administrative inspection under this regulatory scheme. Id. at 313, 98 S.Ct. at
1821. The section of the scheme that supplied Gober authorization to search provided in pertinent
part that "[t]he Commissioner of Insurance shall carefully examine the affairs of each domestic
company as to its financial ability and condition as often as once in three (3) years.... Such
examination shall be made by the commissioner, or by his accredited representatives, and such
companies shall pay the proper charges incurred in such examination...." Miss.Code Ann. § 83-1-25
(emphasis added).11 Clearly, the statute authorizes only the commissioner or his accredited
representative to search AJL.12 It does not authorize an FBI agent to do so. The Government offers
11
Blocker does not challenge the validity of the Mississippi administrative scheme.
12
The majority cites New York v. Burger, 482 U.S. 691, 107 S. Ct. 2636, 96 L. Ed. 2d 601
(1987), for the proposition that, in certain circumstances, warrantless searches of commercial
property may be reasonable under the Fourth Amendment. Those circumstances are not present
here inasmuch as the statute in Burger specifically authorized police officers to conduct an
administrative search. Id. at 694 n. 1, 107 S. Ct. at 2639 n. 1. Unlike in Burger, Blocker could
not have "in effect" consented to an FBI agent's search of his business premises. If the Mississippi
statute had so provided, then Blocker would have had the opportunity to challenge the statute as
in Burger and Barlow's. As the Supreme Court explained, "the regulatory statute must perform
the two basic functions of a warrant; it must advise the owner of the commercial premises that
the search is being made pursuant to the law and has a properly defined scope, and it must limit
the discretion of the inspecting officers." Burger, 482 U.S. at 703, 107 S.Ct. at 2644. "To
perform this first function, the statute must be "sufficiently comprehensive and defined that the
owner of commercial property cannot help but be aware that his property will be subject to
no other exception to the warrant requirement justifying an FBI agent's search.
Although Blocker consented to Gober's search as an accredited representative of the
commissioner, he did not consent (impliedly or otherwise) to Gober's search as an FBI agent. I do
not see this as breaking any new ground for the Fourth Amendment. Simply put, Gober exceeded
the scope of the implied consent under the express language of the statute by allowing an agent of
the FBI to search the records. Of course, as the majority emphasizes, the district court found that
Gober's physical search of AJL would have been no different if Gober had not been an agent of the
FBI. This analysis ignores, however, the district court's findings that from the beginning Gober was
desirous of providing the FBI with any evidence of criminal activity and that Gober entered into an
agreement with the FBI to turn over any such information that he encountered during his
examination. In other words, Gober wore two hats.
In United States v. Bosse, 898 F.2d 113 (9th Cir.1990), the Ninth Circuit addressed an
analogous Fourth Amendment claim. There, the defendant had an application pending for a state
license to deal in automatic machine guns, and an agent of the California Department of Justice
inspected the defendant's premises as part of the licensing process. Unbeknownst to the defendant,
the person who accompanied the California state agent during the search was an Alcohol, Tobacco,
and Firearms (ATF) agent. The only representation made regarding the ATF agent was when the
state agent explained that the ATF agent "is with me." A search warrant was later obtained by the
ATF apparently based on the ATF agent's observations during that search. The Ninth Circuit opined
that "[a] ruse entry when the suspect is informed that the person seeking entry is a government agent
but is misinformed as to the purpose for which the agent seeks entry cannot be justified by consent."
Bosse, 898 F.2d at 115. The Ninth Circuit explained that the ATF agent's silence constituted a
deliberate representation that his purpose was that declared by the California agent and a deliberate
periodic inspections undertaken for specific purposes'." Id. (quoting Donovan v. Dewey, 452
U.S. 594, 101 S. Ct. 2534, 69 L. Ed. 2d 262 (1981)) (emphasis added). "In addition, it notifies the
[business owner] as to who is authorized to conduct an inspection." Burger, 482 U.S. at 711, 107
S.Ct. at 2648 (emphasis added). In the case at bar, the statute did not inform Blocker that an FBI
agent would search or that the FBI agent was desirous of finding evidence of criminal activity.
Thus, the statute failed to perform its function as a warrant notifying the business owner who is
searching and the inspector's specific purpose.
misrepresentation of his true purpose. Thus, the ATF's furtive entry into the defendant's home was
illegal.
Bosse explains that a government agent is not permitted to "gai n access to records which
would otherwise be unavailable to him by invoking the private individual's trust in his government,
only to betray that trust." 898 F.2d at 115 (quoting SEC v. ESM Government Securities, Inc., 645
F.2d 310, 316 (5th Cir.1981)). Yet that is exactly what happened in the case at bar. FBI Agent
Gober gained access to Blocker's records by representing himself solely as an agent of MID. Cf.
United States v. Tweel, 550 F.2d 297 (5th Cir.1977), (holding that the Fourth Amendment is violated
when an administrative officer obtains consent to search by falsely representing that the evidence
obtained will be used only in a civil investigation). The FBI should not be able to piggyback a
criminal investigation onto an administrative search in order to accomplish what it otherwise would
not be able to accomplish.
This case appears complicated by the fact that the person who had the statutory authority to
search AJL's records and the person who was acting as an agent of the FBI were one and the same.
I perceive that to be a distinction without a difference. For all intents and purposes, Gober brought
an agent of the FBI with him to search AJL just as the state inspector covertly brought an ATF agent
with him in Bosse. To me, the fact that the two agents were one and the same person as opposed to
two separate individuals, if anything, makes the search more intrusive in that at least if two persons
arrive to conduct a search, one would have some warning that there could be two persons from
different agencies or dual purposes to the search. One might have some inkling that the scope of
one's consent was exceeded and thus have the opportunity to respond accordingly.
I believe that insofar as Gober was acting as an FBI agent he broke the rule when he gained
entry under the guise of state authority but had an objective not contemplated by Blocker. After
gaining entry, the Government agent's actions must be limited to "the very purposes contemplated
by the occupant." Lewis v. United States, 385 U.S. 206, 211, 87 S. Ct. 424, 427, 17 L. Ed. 2d 312
(1966). I would not presume to think t hat Blocker had contemplated that Gober (who identified
himself only as an agent of MID) had an agreement to turn over any incriminating evidence to the FBI
pursuant to a preexisting, cooperative relationship. The bottom line is that Gober was permitted to
search based on Blocker's consent under the administrative statute, which does not authorize a search
by the FBI. In my opinion, Blocker did not consent in any way, shape, or form to having an FBI
agent search his place of business. Under these circumstances, Blocker had a reasonable expectation
of privacy in the corporate records vis-a-vis Gober's relationship with the Federal Government.
The majority relies heavily on t he fact that Gober, as an MID agent, was authorized to
conduct the search and did not exceed the scope of his state authority. That is true. My analysis does
not touch the search in regard to his state authority. That inspection was legal and the information
properly passed on to MID. If MID had furnished the information to the FBI after it had been
funneled through proper administrative channels, that would fall within the administrative search
exception.13 But that is not what happened. The administrative search exception does not allow the
FBI to send one of its own agents with someone who has the authority to conduct an administrative
search, which is effectively what happened here. The only search I consider illegal is the one that was
conducted by Gober as a federal agent, the fruits of which were used to convict Blocker—that of
course being the intended purpose of the FBI agent.
I believe that the controlling precedent does not allow the United States Government to
exploit the Mississippi statutory authority vested in a financial examiner to search the premises until
the examiner has acquired sufficient evidence to secure a search warrant. Here, the Government
knowingly used and paid a contract employee of MID to do what it was prohibited from doing,
searching without a warrant.14 Pursuant to the majority opinion, the Government may now effectively
13
In light of the district court's finding that "Gober agreed [with the Government] that if he
were to again encounter what he believed to be evidence of criminal conduct by Mississippi
insurers or MID, he would furnish such information to the FBI," and Gober's testimony that he
secretly recorded conversations he had with MID officials, one may speculate whether MID
would have passed any incriminating information on to the FBI. (emphasis added). As such, the
Government acquiesced not only in Gober's search of Blocker but also in an investigation of MID
itself.
14
As the majority notes, maj. op. at 1581 n. 8, it is clear that if Gober had not had any contact
with the FBI but nevertheless searched with the intention of turning over any incriminating
evidence to the FBI, there would be no violation of the Fourth Amendment. The majority thus
reasons that whether Gober went to the FBI before or after searching is a distinction without a
difference. I cannot agree. If Gober had waited to contact the FBI until after the examination,
circumvent the Fourth Amendment by repeatedly dispatching an administrative agent, one that it had
compensated and equipped with a recording device, to search without a warrant. Indeed, there is
nothing in the majority opinion that would preclude the FBI from initiating contact with another
governmental or administrative agent who has authority to search whomever (or whatever) happens
to be the target of a criminal investigation.15
Therefore, concluding that Gober was an agent of the Government and that Blocker had a
reasonable expectation of privacy in the corporate records vis-a-vis Gober's relationship with the
Federal Government, I would hold that the search conducted by Gober as an agent of the United
States Government violated Blocker's rights under the Fourth Amendment.
That, however, does not end the analysis. A constitutional error may be deemed harmless if
the beneficiary of a constitutional error proves beyond a reasonable doubt that the error complained
of did not contribute to the verdict. Chapman v. California, 386 U.S. 18, 24, 87 S. Ct. 824, 828, 17
L. Ed. 2d 705 (1967). As the court below stated, it was "undisputed that without the information
provided by Gober, there would have been no probable cause for issuance of the February 7, 1992
warrant." Further, the warrant resulted in the seizure of the corporate records that were used to
secure Blocker's convictions. Clearly, the evidence that should have been suppressed contributed to
the verdict. The admission of the evidence therefore was not harmless. Because the evidence
obtained from Blocker's search after he was compensated should have been excluded, I would reverse
the district court's denial of Blocker's motion to suppress and remand the case to allow the district
court to determine whether Blocker had standing to challenge the search, an issued raised but never
addressed in the district court.
then the Government could not have known or acquiesced in the search and thus, by definition,
Gober would not have been an agent of the Government. Of course, if Gober was not an agent of
the Government, the Fourth Amendment was not violated. In my view, this case hinges on
whether Gober was acting as an agent of the FBI. Because if he was an agent of the FBI, then he
exceeded the scope of Blocker's implied consent under the Mississippi administrative scheme.
15
Who initiated the contact (either the Federal Government or the person conducting the
search) is simply a consideration in determining if the person acted as an agent of the
Government. Bazan, 807 F.2d at 1204. Here, the majority declares that it is immaterial whether
the person actually was an agent of the Government because the person had the authority to
search under the administrative exception to the warrant requirement.