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FBI's 'We're From The Cable Company' Ruse Not Convincing To Magistrate Judge

Published: February 3, 2015
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Source: Tech Dirt

The FBI's decision to impersonate repair technicians in order to perform a warrantless search is backfiring. Last July, FBI agents investigating an illegal gambling operation worked with Caesars Palace Casino to cut the internet connection to three villas it believed were the operation's ad hoc headquarters. It then sent agents disguised as repairmen to "fix" the problem. Once inside, these agents took photos, recorded video and otherwise observed what they believed to be an illegal bookmaking operation.

Shortly after this warrantless search, the FBI decided it was time to get a search warrant. In its warrant request, it conveniently left out the part where it cut the DSL connection and sent in agents dressed as repairmen. Because of this "fatally flawed" application, a Nevada magistrate judge is recommending the federal district court toss the warrant and suppress the evidence. [Decision pdf link]

Magistrate Judge Peggy Leen ruled that the failure to mention that the original case was born from the "ruse" meant the judge who signed a search warrant this summer didn't have all of the facts. Nowhere in the search warrant request, however, did the authorities mention that they allegedly saw illegal wagering on computers after posing as technicians who in reality briefly disconnected the DSL.

"The investigators' suspicions that Phua was engaged in illegal sports betting at Caesars Palace may be borne out by the evidence recovered in the execution of the warrant," Magistrate Judge Peggy Leen ruled "However, a search warrant is never validated by what its execution recovers."
The material omission of the probable cause's origin (a warrantless search using agents posing as repairmen) should have been enough to get this warrant tossed. The FBI, of course, claimed it omitted this information because it was "law enforcement sensitive." One would think a magistrate judge should have access to sensitive material because it's part of the "law enforcement" field, but the FBI apparently felt otherwise.

Beyond that, there were several flaws in the application -- flaws Judge Leen says weren't intentional but "reckless." The FBI skewed the minimal amount of information it had collected from its illegal entry to make it seem as though it had actually acquired much more damning evidence.
The affidavit was written in a way to suggest investigators had much more information linking Phua to an illegal sports betting operation or wire room connected with the occupants of villa 8888. The affidavit’s repeated use of the phrase “Phua’s and his associates” or “Phua’s associates” or “at the behest of Phua or one of his associates” suggests that Phua was making requests and engaging in conduct which he was not.
And that's only one small part of the affidavit. According to Judge Leen, nearly everything the FBI stated in support of its warrant request completely misrepresented what was actually happening at the Caesar's Palace villas. (Keep the following in mind the next time you visit Las Vegas. In an FBI agent's vivid imagination, your normal, lawfulgambling can easily acquire very sinister connotations.)
The application failed to disclose to the issuing magistrate judge that Wood and SA Lopez defied the butler’s instruction to remain in the butler’s pantry and entered the villa in violation of the Fourth Amendment. The application also falsely stated that Wood was fearful for his safety and was too afraid to accompany SA Lopez on a subsequent entry into villa 8882. A video of Wood’s interaction with the butler taken on July 4, 2014, and produced by the government in discovery reveals this claim is false.


The affidavit falsely stated that an unidentified “associates” of Paul Phua reserved all three villas and that the residents of the villas arrived close in time to each other. In fact, the principal resident of villa 8888, Hui Tang, made his own arrangements with Caesars and arrived several days later than the warrant application claims…


The application is grossly misleading in claiming that eight separate internet lines were installed, and by omitting the fact that the only unusual amount of computer equipment was in villa 8888 and was installed at the request of that villa’s occupants. Caesars installed a single line in each of the six villas in the building, including three villas whose occupants were unrelated to this case.


The agents were working with Caesars’ DSL contractor, Wood TMS, and knew by July 4, 2014, that Caesars had decided to install DSL internet service in each villa as an alternative means of internet access because of pervasive problems with the internet service provided by Cox Communications. The installation of a single DSL line in 8882 did not signify any unusually large amount of internet traffic, and there was no evidence that the residents of 8882 made any unusual requests for equipment or technical support.


The affidavit described deposits to Caesars and transactions between Phua and his associates through Caesars which grossly distorted the nature of those transactions…[T]here is nothing suspicious about gamblers transferring money to their casino accounts. “Front money” deposits are common, and the casino frequently requires a deposit to extend credit. The application omitted references to these facts and attempted to characterize the deposits as suspicious.


The application represents that Phua transferred $3 million to Gyouye Huang. Huang was a guest in villa 8882. Caesars’ record actually indicates “signed marker MKR for $3Mil trans to 4266598 [Huang Caesars player number] Chen Husan per MG/Bing.” The search warrant application omitted reference to the fact that that it is common for gamblers to share credit lines and that specific individuals involved in this investigation had done so in prior years on prior gambling trips. Even assuming the agents were “confused,” confusion is not probable cause, and the credit line was not fairly characterized to the issuing magistrate judge.
And then there's the testimony of Special Agent Minh Pham, which contains an interesting statement caught by Marcy Wheeler of Emptywheel.
After Pham submitted and obtained the search warrant, he learned the affidavit contained errors. Specifically, it stated that Paul Phua wired $4 million into a Caesars account to secure a credit line. Pham later discovered it was actually Seng Chen “Richard” Yong that requested the wire to secure both their lines of credit. However, at the time Pham submitted the search warrant affidavit, he believed it was correct that Paul Phua had initiated this transfer.

The affidavit also stated Paul Phua had transferred approximately $900,000 from a casino in Fort Lauderdale, Florida, to the Caesars account. However, Pham later learned that Paul Phua had been only one of the individuals who signed the consent to have that money wire-transferred into Yong’s account. At the time Pham submitted the affidavit, he believed the statement was true based on documents from Caesars concerning monetary transfers that he had received. Pham referred to the spreadsheet contained in government’s Exhibit 2F as a document he relied upon to support his statement in the affidavit. The font size was very small and difficult to read.

He also discovered another error in the affidavit days later. There were transfers for $3 million between individuals in the villas. He looked at the spreadsheet, and it was off by one or two lines,” which caused him to associate the wrong name with the transfer.
As Wheeler notes, the FBI seems to have a malleable baseline when it comes to font sizes. What Caesars turned over voluntarily was "very small and difficult to read." But the agents used it without demanding something more legible. Compare that to the high-profile government takedownof encrypted email developer Ladar Levison.
You’ll recall that when the FBI went after Lavabit to get its crypto key, Lavar Levison tried to comply by providing a printout of the key. But the government complained it was illegible, and got Levison held in contempt.
So, Levison's 4-point printout of his encryption key was too small for the FBI, which complained to the court until it got its way. In this case, a "too small" printout was used without complaint, ultimately resulting in several flawed assertions being made in a warrant affidavit. "Too small" must be another part of the FBI's double standards -- one that makes concessions to third parties more amenable to the agency's aims.

A district court judge will make the final decision as to whether this warrant remains tossed. The saddest part about this is that the FBI gave itself an (illegal) head start and still managed to hand in a warrant request loaded with bad detective work and worse conjecture.

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