P.S. Docket No. 5/112
July 19, 1977
In the Matter of the Complaint Against
JOHN C. ROCHE d/b/a DAN POTTER INSURANCE AGENCY
582 Columbia Rd.
Dorchester, MA 02125
and
DAN POTTER INSURANCE AGENCY
340 Waverly St.
Framingham, MA 01701
and
DAN POTTER INSURANCE AGENCY
1985 Columbus Ave.
Roxbury, MA 02119
and
DAN POTTER INSURANCE AGENCY
1671 Blue Hill Ave.
Mattapan, MA 02126
and
DAN POTTER INSURANCE AGENCY
241 Washington St.
Brookline Village, MA 02147
and
KANE/ROBINSON INSURANCE AGENCY
219 Central St.
Lowell, MA 01852
and
HUB/KORITZ INSURANCE AGENCY
396 Washington St.
Brighton, MA 02135
and
MALDEN SQUARE INSURANCE AGENCY
211 Middlesex Ave.
Medford, MA 02155
and
JOHN C. ROCHE INSURANCE AGENCY
1070 River St.
Hyde Park, MA 02136
and
JOHN C. ROCHE INSURANCE AGENCY
664 Pleasant St.
New Bedford, MA 02740
and
JOHN C. ROCHE INSURANCE AGENCY
135 Chelsea St.
East Boston, MA 02128
and
JOHN C. ROCHE INSURANCE AGENCY
15 Main St. Watertown, MA 02172
and
UNIVERSAL PREMIUM FINANCE CO.
18 Tremont St.
Boston, MA 02108
P.S. Docket No. 5/112;
07/19/77
Lussier, Edward F.
APPEARANCES FOR COMPLAINANT:
DanielS. Greenberg,Esq. Law Department
United States Postal Service
Washington, D.C.
APPEARANCES FOR RESPONDENT:
Thomas C. Troy, Esq.
Angelo P. Catanzaro, Esq.
Jerry Effren, Esq.
Dorchester, MA
APPEARANCES FOR COMMONWEALTH OF MASSACHUSETTS:
Catharine W. Hantzis,Esq.
Assistant Attorney General
Commonwealth of Massachusetts Boston, MA
POSTAL SERVICE DECISION
This case is on appeal to the undersigned from an Initial Decision rendered by Administrative Law Judge Quentin E. Grant. That decision found that Respondent, through the business activities shown in the caption above, was using the United States mails in a system of misrepresentation by deliberately overcharing for insurance premiums. Accordingly, Judge Grant recommended the issuance of a mail-stop order under the provisions of 39 United States code § 3005. There is presently in effect an unopposed preliminary injunction issued by the United States District Court for the District of Massachusetts on December 17, 1976, under authority of 39 United States Code § 3007. This injunction, as modified on March 4, 1977, provides for detention of mail by the postmaster pending conclusion of these statutory proceedings and any court appeal therefrom and provides that the Respondent and representatives of Aetna Casualty & Surety Company and Commercial Union Insurance Company may examine the mail. It further provides that the mail pertaining to insurance policies placed with those companies "may be processed and reviewed by Aetna Casualty & Surety Company and Commercial Union Insurance Company."
Respondent's appeal to the undersigned lists two general exceptions to the Initial Decision. The first contends there was error in the denial of its motion to dismiss these proceedings on Fourth Amendment considerations. At the same time as filing its appeal Respondent filed a motion requesting the undersigned to commence additional evidentiary hearings on the Fourth Amendment issue. The second exception contends that the recommended return of the mail to senders would be inappropriate in view of an existing procedure established by consent judgment in a state action instituted against Respondent by the Attorney General of the Commonwealth of Massachusetts. 1/
A brief introductory summary is appropriate prior to addressing the exceptions. The testimony of former employees of Respondent established that there was a practice of overcharging customers by adding generally $100 to the true premium with each agency sending in coded weekly progress reports and awarding bonuses for the effort. Also received in evidence was a stipulation listing thirty-three cases where testimony would be presented to show specific use of the mails in the overcharge scheme. On the evidence presented there is no doubt that Respondent was engaged in a misrepresentation scheme involving the use of the mails. The only material issue on appeal is whether the evidence relied upon to reach that conclusion is evidence which must be suppressed because of the mandate of the Fourth Amendment to the Constitution forbidding unreasonable searches and seizures.
With respect to the Fourth Amendment contention each party made an offer of proof, Respondent, at the administrative hearing (Tr. 2--52-56) and Complainant, by agreement of the parties and permission of Judge Grant (Tr. 57) by formal filing thereafter. These offers are pertinent to the first exception and are worthy of full quotation here.
Respondent's offer of proof is that:
"The Respondent makes this offer of proof. It is submitted that, if the Respondent had the power of compulsory process, he would call to the witness stand and elicit from the following witness this testimony: That Carmen Marciano, a former employee of the Roche Agency, did in August of '76 meet with the Commissioner of Insurance of the Commonwealth of Massachusetts and learned that his license to broker insurance was in jeopardy because of his interaction with John C. Roche. That, after this meeting, Marciano met with one Charles McShane, an executive of the Etna Insurance Company, whose office is located in Boston. This meeting was arranged either on the Commissioner's or McShane's suggestion or on Marciano's own initiative.
"Marciano would also testify that as a result of these meetings he learned that he could salvage his license and have future employment arranged if he cooperated with McShane in an attempt to draw John C. Roche out of the insurance business.
"That at this point in time, shortly after this meeting with McShane, Marciano met with one postal inspector, George Hazel and that, in fact, he met with Hazel on more than one occasion. That at one of these meetings, Marciano discussed with Hazel certain documents that he either gave Hazel directly or he had given McShane who provided them for Hazel. Among these documents, Marciano would testify, was a weekly progress report from the Lowell office which has been testified to in these proceedings.
"Marciano would further testify that at this time or sometime prior to December 10, 1977, Hazel learned that these documents had been obtained by Marciano as a result of a surreptitious and illegal entry in the middle of the night that Marciano made into the Roche office located in Lowell.
"Marciano would also testify that on December 31, 1976, he, George Hazel, Charles McShane and one Dorothy Lewarne met for lunch at the Prince Grotto Restaurant in Boston, and, in fact, discussed this breaking and entering of the Roche Agency and the stealing of an aforementioned document.
"Marciano would also testify that on February 14, 1977, he was subpoenaed by the Respondent in this matter to testify in Suffolk Superior Court in the case of Commonwealth of Massachusetts versus John C. Roche, et al, Civil Action No. 19302, that prior to his being called as a witness, his attorney, one Robert Monroe, met in chambers with the Superior Court Judge, Gorden Doerfer, and counsel for the Commonwealth and the Defendant, that as a result of this conversation, Marciano was not called to the stand by the Defendant.
"It is further submitted that, if Marciano's attorney, Robert Monroe, would testify, he would say that at said chamber conference, after an offer of proof consisting substantially of the testimony of the Respondent in the offer of proof given at bar, would expect to elicit from Marciano, by attorney Thomas Troy on behalf of his client John Roche, that Monroe inform the Court that, in response to any question posed by Mr. Troy regarding this offer of proof, he would advise his client to answer on the basis of his privilege of self incrimination under the Fifth Amendment.
"That Charles McShane would corroborate those portions of Marciano's testimony which McShane had personal knowledge.
"That one Dorothy Lewarne, a former employee of the Bay Colony Insurance Agency, would testify that Marciano had told her of his involvement with Etna in August of '76 shortly after that time. She would also testify that she met with Marciano, Postal Inspector Hazel and McShane at the Prince Grotto Restaurant on the 21st of December, 1976 at which time she had a conversation with these individuals concerning Marciano's surreptitious and illegal entry into the Roche Agency and Hazel's knowledge of same.
"During this conversation, Miss Lewarne would testify that Marciano confirmed this breaking and entering and subsequent transmission of those documents to McShane. She would also testify that Postal Inspector Hazel asked her to be informant against Respondent Roche. Miss Lewarne would also testify that Marciano used her keys to surreptitiously enter the Lowell office in September of '76 where he made copies of the progress report work sheet which he subsequently transmitted.
"George Hazel, if forced to testify under subpoena and under oath, would corroborate his knowledge that the documents which came into his possession from either Marciano or McShane were the subject of a larceny, taken in violation of Respondent's Fourth Amendment rights.
"That is my offer of proof, Your Honor."
(Tr. 2--52-56)
Complainant's offer of proof is that:
"As agreed by the parties and the Presiding Officer (February 16, 1977; Tr. 56), Complainant submits herewith the following offer of proof in reply to that of Respondent (Tr. 52-56), concerning the information appearing on the summaries introduced into evidence as Complainant's Group Exhibit No. 1:
"If called to testify, Postal Inspector D. P. Kelleher would state that all of the names appearing on the summaries were developed independently of any information acquired as a result of the facts alleged in Respondent's offer of proof in that, on or about January 3, 1977, he met with representatives of Aetna Casualty and Surety, and requested that he be supplied with the names and addresses of policyholders who may have dealt with any of the Roche insurance agencies. Upon receipt of the requested information, Inspector Kelleher, together with other inspectors under his supervision, contacted as many of these policyholders as possible in order to determine the particulars of their dealings with Roche.
"The premiums paid by these policyholders, less any other known fees for items or services other than insurance, were compared with Aetna's computer print-outs showing the amount of Aetna had charged Roche for the particular policy in question. This information, together with other pertinent information, was entered on the summary."
Judge Grant found no suggestion in the Respondent's offer of proof that the alleged illegal search and seizure was with the preknowledge or acquiescence of the Complainant, its officers or employees. He concluded that where no official of the federal government has any connection with a wrongful seizure or any knowledge of it until after the fact the evidence so seized is admissible, and if the Fourth Amendment protection applies in proceedings of this nature, "a matter not free from doubt" that
Respondent had not asserted or proved facts under which it could have been invoked (Initial Decision, p. 6).
Respondent's appeal brief takes issue with the conclusion that the offer of proof contained no allegation of federal acquiescence. It argues that the affidavit of Inspector Hazel which formed the basis for the federal search warrant failed to inform the issuing magistrate that he had access to documents obtained by a private party by means of an illegal entry to Respondent's premises. 2/ It would extend the initial alleged illegality to the later use of the documents so obtained to construct a bridge of acquiescence amounting to federal participation in the seizure itself. In this Respondent goes beyond the existing state of the law for the reasons hereinafter expressed.
In United States v. Janis, 428 U.S. 433 (1976), the Supreme Court declined extending the exclusionary rule to a federal civil proceeding absent federal involvement in the illegal search and seizure by state police, holding:
"In short, we conclude that exclusion from federal civil proceedings of evidence unlawfully seized by a state criminal enforcement officer has not been shown to have a sufficient likelihood of deterring the conduct of the state police so that it outweighs the societal costs imposed by the exclusion."
428 U.S. 433 at p. 454.
It is clear that the exclusionary rule, as a deterrent sanction is not applicable, for obvious reasons, where a private party or a foreign government commits the offending act. See United States v. Janis, supra, footnote 31 citing Burdeau v.McDowell, 256 U.S. 465 (1921); United States v. Stonehill, 405 F.2d 738 (CA 9, 1968), cert. denied, 395 U.S. 960 (1969). See also United States v. Mekjian, 505 F.2d 1320 (CA 5, 1975); UnitedStates v. Clegg, 509 F.2d 605 (CA 5, 1975); United States v.Newton, 510 F.2d 1149 (CA 7, 1975).
The genesis of the Fourth Amendment exclusionary rule makes it clear that federal participation or involvement in the illegal search and seizure is an essential prerequisite to any suppression, in a federal civil proceeding, of evidence resulting therefrom United States v. Janis, supra, and cases cited. Moreover, after reviewing at some length the history of the exclusionary rule and its foundation on presumed deterrent effect, the Court indicated that it was not deciding but rather reserving the issue of the applicability of the exclusionary rule to civil proceedings involving an intrasovereign violation, i.e., federal involvement or participation in the illegal search and seizure. 3/ See 428 U.S. 433 at 447, 456, and footnote 31.
But whatever the result on the reversed issue the facts of this case as reflected in the record made by the parties, including the offers of proof, do not warrant concluding that the evidence upon which the Initial Decision was based come within the purview of the exclusionary rule.
Respondent's argument on its Fourth Amendment contention states that the nature of the administrative hearing was such that evidence surrounding the allegations contained in Respondent's Motion to Dismiss could be introduced only through the testimony of witnesses who volunteered to appear. It cites § 952.19 of the applicable Rules of Practice, 39 CFR Part 952, which provides that "The Postal Service is not authorized by law to issue subpoenas requiring the attendance or testimony of witnesses." This would, of course, limit the availability of witnesses such as the third party individual who allegedly made the illegal search and seizure here. Accepting Respondent's offer of proof it may be conceded that individual might well refuse to testify if subpoenaed. However, the absence of subpoena power in the administrative proceeding would not limit the otherwise inherent power of the Postal Service to compel the attendance of its own employees at such a hearing. In the instant case the pertinent testimony from Respondent's viewpoint would appear to be that of the Postal Inspectors. While Respondent states (Appeal Brief, p. 8) that the evidence was "limited by the Judge below to the Respondent's offer of proof (Tr. 2 pp. 52-56)" that is not accurate. The transcript citation is to the offer of proof but the record is clear that it was at the parties' election that offers of proof were made (Tr. 1--55; Tr. 2--8). But for the parties' election to put in offers of proof the Postal Inspectors would have been available for examination by Respondent.
Respondent's representation 4/ in support of its motion to reopen to take further evidence goes no further than Respondent' offer of proof in that it also fails to allege preagreement or participation in the illegal entry. Accordingly, the foregoing is not a valid basis for reopening the hearing at this stage. Nor does the second ground for requesting reopening afford a better basis. That second ground is Respondent's claim that:
"An evidentiary hearing is needed to determine if, in fact, the complainant's offer of proof demonstrated a source independent of the evidence seized by the Postal Service during the course of its criminal investigation of Respondent so as to make its Exhibit 1 admissible as evidence." Not only does the statement beg the question 5/ of federal complicity with the alleged illegal act, but, without offering proof of a different nature it implies cross-examination of the postal inspector as the means of enlightening the record. However, there is no reason to believe that Inspector Kelleher, could not have been called at the hearing of this case before Judge Grant had Respondent requested.
Respondent has had its hearing and made the record it chose to make. The denial of its Motion to Dismiss was proper under the circumstances and applicable law and its exception to that ruling is disallowed. Its motion to reopen is not meritorious and is accordingly denied.
The second exception raised by Respondent, while given less attention in the parties' Briefs does more to raise a question than present a basis for its solution. Respondent contends that returning the impounded mail to senders under a mail-stop order would serve no purpose nd that the mail should be released to the trustee appointed as a result of the consent judgment in the Massachusetts court. Respondent suggests that return of mail to a consumer may vitiate liability of the insurance underwriter to that consumer. Complainant simply states that it "considers the Massachusetts agreement inadequate for the protection of the public" and advises that it "has prepared a letter designed to notify senders of mail who have not been contacted by the insurance companies of the instant action, in order that they may assure themselves of coverage" (Appeal Brief, pp. 12, 13).
As indicated earlier in this decision 6/ the Commonwealth of Massachusetts, while originally objecting to the return of mail to senders, withdrew that objection based upon a modification to the March 4, 1977 federal court order detaining the mail. The record is not entirely illuminating on this point since it appears that the only substantive effect of the modification was to allow Commercial Union Company to review the mail whereas previously only Respondent and Aetna Casualty & Surety Company had permission. Nevertheless it could be expected that the passage of time has tended to lessen, or eliminate, the problem of consumer notification, considering that the federal court order detaining the mail was issued in December 1976, the modification in March 1977 and the last Brief filed in this proceeding in the middle of June 1977.
The federal court order permitting the insurance companies limited access to the detained mails was clearly intended to permit responsible follow through by these companies to provide insurance coverage and process insurance claims. There is no indication that the action taken has been inadequate although it is indicated by Complainant's Brief that there are some instances where action has ot been taken by the insurance companies because of a question whether or not the particular sender was one of their insureds. It is to this group that Respondent proposes to issue letter notification. As to this group no matter how small it may be, if there is any question that return of the mail to them might prejudice their rights to claim coverage, I am disinclined to extend the mail-stop order to that mail absent a request from the sender, or other good reason shown to do so.
Since the order of the federal District Court requires continued detention of the mail pending completion of the administrative appeal "and any appeal therefrom" to the court, the mail-stop order being issued in this case which requires the return of all mail cannot be put into full effect until that injunction is vacated or modified. Therefore a supplement to the mail-stop order is simultaneously being issued staying its effect until that court action takes place and the undersigned is notified of it. The Respondent is directed to advise at that time, should the court action not resolve the matter, what actions have been taken, or are proposed, to avoid prejudice to any sender flowing from such return of the mail. The advice should be detailed sufficiently to enable the undersigned to either place the mail-stop order into full effect or issue an appropriate modification which will serve the purpose intended by the statute.
1/ In this latter connection the Commonwealth appeared at the administrative proceeding before Judge Grant and expressed concern regarding the effect of returning the mail to senders under 39 U.S.C. § 3005. However, after the administrative hearing the Assistant Attorney General, Consumer Protection Division, wrote to Judge Grant advising that because of the modification to the preliminary injunction, the Commonwealth of Massachusetts was withdrawing its objections concerning the return of mail to senders.
2/ The affidavit which Respondent refers to is attached to its Exhibit 1 and is stated (Tr. 2--51) to be the affidavit supporting the Commonwealth of Massachusetts court action against Respondent. That affidavit is dated December 17, 1976, and notarized December 29, 1976. The federal search took place on December 10, 1976 (Tr. 2--38). Respondent has attached to its Reply Brief a copy of an affidavit by Inspector Hazel sworn and subscribed to on December 10, 1976, which in the body thereof is stated to be given for the purpose of obtaining search warrants for Respondent's agencies. Neither affidavit is signed. However, both refer to numerous sources of information which appear totally unconnected with the purloined documents.
3/ Respondent's citation of the decision of the Supreme Court in G. M. Leasing Corporation v. United States, (decided January 12, 1977), for the proposition that suppression is appropriate in all types of cases goes beyond the holding of the Court in that case. The Court there refused to suppress "in futuro" evidence derived from an unlawful search and seizure by IRS agents stating that "The suppression issue, as to books and records, obviously is premature and may be considered if and when proceedings arise in which the Government seeks to use the documents or information obtained from them." 45 LW 4098 at 4104.
4/ "Since the termination of the hearings below related hearings before the Division of Insurance of the Commonwealth of Massachusetts (Docket No. DOI-ABH 77-03-V) revealed substantial complicity between the Postal Service, the Aetna Insurance Company, The Division of Insurance of the Commonwealth of Massachusetts and Carmen Marciano, the individual, who illegally entered one of Respondent's agencies."
5/ The need for establishing a source of evidence independent from the private party search is to preclude use of "fruit from a poisoned tree" but here, as indicated, we have no poisoned tree to begin with absent proof, or offer of proof, of federal involvement or participation in the illegal search and seizure.