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United States v. Phua

United States District Court, D. Nevada

April 17, 2015

WEI SENG PHUA, et al., Defendants

For Wei Seng Phua, Defendant: David Z. Chesnoff, Richard A Schonfeld, LEAD ATTORNEYS, Chesnoff & Schonfeld, Las Vegas, NV; Thomas C. Goldstein, LEAD ATTORNEY, Goldstein & Russell, P.C., Bethesda, MD.

For Darren Wai Kit Phua, Defendant: Richard A Schonfeld, LEAD ATTORNEY, Chesnoff & Schonfeld, Las Vegas, NV; Thomas C. Goldstein, LEAD ATTORNEY, PRO HAC VICE, Goldstein & Russell, P.C., Bethesda, MD.

For Center for Democracy Technology, Proposed (#245) Motion for leave to file Brief to Proceed Amicus Curiae, Amicus: Clayton Northouse, LEAD ATTORNEY, PRO HAC VICE, Sidley Austin LLP, Washington, DC; Edward Robert McNicholas, LEAD ATTORNEY, Sidley Austin LLP, Washington, DC; Steven E. Guinn, LEAD ATTORNEY, Laxalt & Nomura, Ltd, Reno, NV.

For Caesar's Entertainment Corporation, Interested Party: Charles B Sklarsky, Monica Rose Pinciak, LEAD ATTORNEYS, Jenner & Block, Chicago, IL; Dominic P. Gentile, Gordon & Silver, Ltd., Las Vegas, NV; Vincent Savarese, Gordon Silver, Las Vegas, NV.

For USA, Plaintiff: Kimberly M Frayn, LEAD ATTORNEY, U.S. Attorney's Office, Las Vegas, NV; Cristina D Silva, U.S. Attorneys Office, Las Vegas, NV; Daniel D. Hollingsworth, U.S. Attorney's Office, Las Vegas, NV; Phillip N. Smith, Jr., United States Attorney's Office, Las Vegas, NV.



(Dkt. Nos. 229, 232, 406, 407, 418, 419, 420)

The Fourth Amendment protects " the right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures." U.S. Const. amend. IV. This case tests the boundaries of how far the government can go when creating a subterfuge to access a suspect's premises. Here, the government disrupted the internet service to the defendant's hotel room in order to generate a repair call. Government agents then posed as repairmen to gain access to the defendant's room and conduct a surreptitious search for evidence of an illegal sports betting operation. By creating the need for a third party to enter defendant's premises and then posing as repairmen to gain entry, the government violated the defendant's Fourth Amendment rights.


The sole remaining defendant in this case, Wei Seng Phua, objects to two Reports of Findings and Recommendation (Dkt. #406 & #407) Magistrate Judge Leen issued on Phua's two motions to suppress. The first (Dkt. #407) addresses Phua's motion to suppress evidence obtained during two allegedly unconstitutional searches of his hotel room at Caesars Palace Hotel & Casino (" Caesars" ). The second (Dkt. #406) addresses Phua's motion to suppress based on alleged omissions and misrepresentations in the search warrant affidavit. The United States objects only to the second Report of Findings and Recommendation.

The indictment (Dkt. #86) charges Phua and the other defendants with transmitting wagering information in violation of 18 U.S.C. § 1084(a), operating an illegal gambling business in violation of 18 U.S.C. § 1955, and aiding and abetting in violation of 18 U.S.C. § 2.[1] The indictment alleges that in June and July of 2014, Phua and the other defendants were engaged in an illegal gambling business that accepted wagers on the World Cup Soccer Tournament. The investigating agents suspected this alleged business operated out of three luxury villas at Caesars: villas 8881, 8882, and 8888. Phua occupied villa 8882.

The investigation began with Caesars' Manager of Special Investigations, Paul Urban. Urban conducted an internal investigation into whether the occupants of villa 8888 might be illegally taking bets on the tournament. He interviewed hotel employees who had been inside villa 8888 and had seen a number of computers, monitors, and chairs set up in a configuration that resembled a boiler room bookie operation. One worker indicated that he saw a computer screen displaying words in Chinese as well as several columns of numbers that looked like betting odds. Urban forwarded information about his investigation to the Nevada Gaming Control Board (" NVGCB" ). The NVGCB contacted the FBI, which triggered a joint NVGCB/FBI investigation. The lead NVGCB agent was Ricardo Lopez.

Caesars cooperated with the NVGCB/FBI investigation and provided records about the villas' residents. Mike Wood, a principal of Wood Telemanagement & Solutions (" TMS" ), also cooperated with the investigation. TMS maintains the villas' high-speed internet connections (" DSL" ) for Caesars. Lopez, FBI special agent Minh Pham, and another agent interviewed Wood about the work he had done inside the villas and asked him how they could get inside surreptitiously. With Wood's help, they developed a plan to disrupt DSL service in villas 8882 and 8888 to generate a call for service.[2] The plan was to have agents pose as repairmen and then conduct a search once inside the villas.

Wood disconnected the DSL for villa 8888 and 8882 on the morning of July 4, 2014. But the plan was unsuccessful because either the residents did not report an outage to Caesars or Caesars did not tell Wood.[3]

That same day, the residents of villa 8882 requested that the hotel provide them with a laptop computer. Caesars contacted Wood, and Wood contacted the investigating agents. Wood and Lopez delivered the laptop with Lopez dressed as a technician to " look the part." Wood and Lopez were met by the butler[4] for villa 8882 at the entry pantry. Wood and Lopez told the butler they needed to go past the pantry to check the internet connection. The butler denied them entry into the villa's interior, explaining that the residents had instructed him to keep the villa private. The butler then left the pantry area. Despite the butler's instructions, Wood and Lopez entered the interior. The butler intercepted Wood and Lopez, denied them further access, and ushered them back to the pantry. Wood and Lopez recorded their entry into the villa with hidden cameras.

The following morning, Wood cut the DSL connection to villa 8882 from his office at TMS. Phua told the butler on duty the internet was not working, and she contacted her manager at Caesars to fix it. Lopez and FBI agent Michael Kung, who were dressed as TMS technicians and had hidden recording devices, went to villa 8882. Wood had told Lopez and Kung how to appear like legitimate technicians and how to act like they were fixing the DSL. The agents knew that the DSL connection could not be restored inside the villa and instead had to be reconnected from the outside (within a few feet from where Wood was sitting in his office). The ruse's only purpose was to gain entry into villa 8882 and gather evidence without a warrant.

When Lopez and Kung arrived at villa 8882, they were admitted by the butler, who asked if they were there to fix the DSL. The butler took them to the media room where the router was located. Lopez and Kung saw Phua and others in the room. Phua was sitting at a laptop computer that displayed an illegal online sports wagering website. The laptop screen also displayed an active instant messaging window that contained an incoming message stating " good luck on the hedge bet" or something similar. Lopez saw one of the other individuals using another laptop computer that displayed the login screen for an illegal sports wagering site. This person switched the web page to a Google search page when he noticed Lopez was approaching him. After spending some time in the villa pretending to attempt to fix the DSL, Lopez called Wood, who restored the connection. The agents remained in the room to continue their search, pretending to confirm that the connection had been restored for all of the computers in the villa.

The agents subsequently applied for warrants to search all three villas. The application cites facts garnered during the course of the warrantless intrusions to link together the residents of the three villas. Magistrate Judge Nancy Koppe signed search warrants for the three villas on July 9, 2014. Pursuant to the warrants, law enforcement searched all three villas and seized evidence.

Phua filed two motions to suppress. One is based on the two warrantless entries into villa 8882. The other is based on alleged omissions and misrepresentations in the warrant affidavit. Judge Leen held a four-day evidentiary hearing on Phua's motions in December 2014. She issued two Reports of Findings and Recommendation. With respect to Phua's motion to suppress based on the warrantless searches, she recommends I find that Wood and Lopez violated Phua's Fourth Amendment rights when they visited the villa on July 4 to deliver the laptop. In her view, it was unconstitutional for them to exceed the scope of consent by disregarding the butler's instructions not to enter the villa's interior.

Judge Leen also recommends I find the agents did not violate Phua's Fourth Amendment rights when they disrupted the DSL and then posed as service technicians. She found that Phua consented to the agents entering the villa and he therefore " surrendered [his] privacy to what [he] exposed to the view of Lopez and Kung when [he] admitted them to fix the fake DSL disruption." (Dkt. #407 at 32.) Judge Leen found Phua's consent was voluntary because the ruse did not raise a safety issue or disrupt an essential service so that the occupants would feel they had no choice but to allow entry. ( Id. ) Judge Leen further found that Kung and Lopez were allowed into the areas they claimed they needed to be in order to restore the DSL connection, and thus they engaged in conduct within the scope of Phua's consent. ( Id. ) Although Phua was " tricked," Judge Leen concluded that he " assumed the risk of what the two men [he] admitted would see [and] what [he] exposed to view in allowing their entry." Id.

With respect to Phua's Franks motion to suppress based on defects in the warrant application, Judge Leen recommends I suppress evidence seized as a result of the search of villa 8882 conducted pursuant to the warrant. She found that after supplementing the warrant application with material information that was omitted and correcting misrepresentations in the affidavit, the warrant affidavit lacks probable cause.


The Federal Magistrates Act does not allow a magistrate judge to decide a motion to suppress evidence in a criminal prosecution. 28 U.S.C. § 636(b)(1)(A); United States v. Raddatz, 447 U.S. 667, 673, 100 S.Ct. 2406, 65 L.Ed.2d 424 (1980) (stating that with respect to a motion to suppress in a criminal case, a magistrate judge " has no authority to make a final and binding disposition" ). Under 28 U.S.C. § 636(b)(1)(B), a district judge may authorize a magistrate judge to " conduct hearings, including evidentiary hearings, and to submit to a judge of the court proposed findings of fact and recommendations for the disposition" of motions that the magistrate cannot dispose of under § 636(b)(1)(A). After the magistrate judge has submitted proposed findings of fact and recommendations, the district judge is required to " make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made." 28 U.S.C. § 636(b)(1); see also Reynaga v. Cammisa, 971 F.2d 414, 416 (9th Cir. 1992) (" The primary difference between subsections 1(A) and 1(B) is that the former allows the magistrate [judge] to determine the matter (subject to the review of the district court for clear or legal error) while the latter allows the magistrate [judge] only to submit proposed findings and recommendations for the district court's de novo review." (quotation omitted)).

I therefore review de novo the findings and recommendations regarding Phua's motions to suppress. I " may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. ยง 636(b)(1). ...

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