Aggressive Wiretap Affirmed With Little Fanfare

On Jan. 8, 2013, in a surprisingly quiet summary order, the Second Circuit upheld the judgment of conviction of James Fleishman, who was convicted for conspiracy to commit securities fraud and wire fraud based in part on a "trunk line" wiretap. United States v. Fleishman, Summary Order, No. 12-94-cr (2d Cir. Jan. 8, 2013).

The wiretap order was aggressive and unique. It captured 104 different PIN numbers of a third-party conference call line housed in Las Vegas. Wiretapping such a large number of users was not necessarily remarkable, but what was really surprising was that the government did not allege, and no court ever found, that there was probable cause that each separate PIN number was being used to facilitate criminal activity—only that evidence of criminality could be found on the conference call line as a whole.

The Fleishman case presented unique hurdles to law enforcement's investigation, although the hurdles were more logistical than apparently legal. By statute, wiretaps cannot be used to purely investigate insider trading. See 18 U.S.C. § 2516. This is by no means a new issue. Law enforcement typically solves this problem by adding wire fraud as the crime being investigated (which is authorized by statute), and courts have held that when a law enforcement officer is lawfully searching for evidence for a crime such as wire fraud and "may happen upon evidence of another crime," such as insider trading, he is not obligated to "ignore what is in plain view." See Memorandum Opinion & Order, United States v. Rajaratnam, 09 Cr. 1184 (RJH) (Nov. 24, 2012); United States v. Masciarelli, 558 F.2d 1064, 1067 (2d Cir. 1977); 18 U.S.C. § 2517(5).

Law enforcement is required to have a good faith investigation into the enumerated crime, and should not use it as a "subterfuge" to gather evidence for a non-enumerated crime, United States v. Marion, 535 F.2d 697, 700 (2d Cir. 1976), but in current-day insider trading cases where inevitably there were communications by phone or by email, this is largely a distinction without a difference.

Thus the hurdle in the Fleishman case was not legal, but logistical, and was principally a result of trying to adapt the use of wiretapsan investigative tool that has predominantly been used in drug trafficking casesto securities cases. Drug dealers typically use unsubscribed and/or month-to-month cellphones where the difficulty is in identifying the phone being used, but once that phone is identified every...