United States v. Elbaz

396 F.Supp.3d 583

UNITED STATES of America

v.Lee ELBAZ, Defendant.

Criminal Action No. TDC-18-0157

United States District Court, D. Maryland.

Signed June 20, 2019

Ankush Khardori, Caitlin R. Cottingham, Tracee J. Plowell, David Stier, Henry P. Van Dyck, US Department of Justice, Lawrence Rush Atkinson, Jennifer Farer, Washington, DC, for United States of America.

Barry Joel Pollack, Jessica A. Ettinger, Pro Hac Vice, Robbins, Russell, Englert, Orseck, Untereiner & Sauber LLP, Washington, DC, Alex Spiro, John Chun, Quinn Emanuel Urquhart and Sullivan LLP, New York, NY, for Defendant.

MEMORANDUM OPINION

THEODORE D. CHUANG, United States District Judge

Defendant Lee Elbaz is charged with one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349, and three counts of wire fraud, in violation of 18 U.S.C. § 1343 and 18 U.S.C. § 2. Presently pending before the Court is Elbaz's Motion to Dismiss the Indictment or, in the Alternative, to Disqualify the Prosecution Team. After briefing, the Court held a hearing on the Motion on May 9, 2019. The parties then submitted supplemental briefing. At the Court's request, the Government filed affidavits from certain members of the Prosecution Team providing specific facts relevant to the Motion. For the reasons set forth below, the Motion is GRANTED IN PART and DENIED IN PART.

BACKGROUND

Relevant factual and procedural background information is recounted in the Court's September 10, 2018 Memorandum Opinion. United States v. Elbaz , 332 F. Supp. 3d 960, 966–67 (D. Md. 2018). Additional facts and procedural history specific to the Motion are provided below.

I. The Filter Process

In conducting its investigation into the binary options industry, the Government has obtained millions of documents relevant to their inquiry pursuant to search warrants and other authorized means. Since it was understood that some of these documents may be protected under the attorney-client or another privilege, the Government established a team of attorneys and personnel from the United States Department of Justice ("DOJ") and special agents and other personnel of the Federal Bureau of Investigation ("FBI") (collectively, the "Filter Team"), to identify and separate the privileged materials from the nonprivileged materials before providing any of the documents to the DOJ attorneys and FBI special agents who have investigated the binary options markets and would prosecute Elbaz and other individuals involved in the alleged fraud (the "Prosecution Team"). After a tranche of documents completed the filter process, nonprivileged documents were provided to the Prosecution Team. Any potentially privileged documents identified in the filter process for which Elbaz held the privilege or was a recipient of the communication were provided to Elbaz and her attorneys. Any documents for which Elbaz did not hold the privilege and was not a party to the conversation were catalogued on a privilege log, which was then provided to Elbaz's counsel.

The process to separate privileged from nonprivileged material was designed to work in the following manner. After a set of documents was received by the Government, pursuant to a search warrant, subpoena, or otherwise, the Filter Team would take the original media on which the documents were produced, apply search terms to separate out all potentially privileged materials, and then release the remaining files to an FBI database accessible to FBI members of the Prosecution Team. The nonprivileged materials would then be copied from the FBI database to the DOJ's document database, which was housed on a platform named Relativity (the "Relativity database"), where they would be accessible to the DOJ members of the Prosecution Team. Meanwhile, documents separated out as potentially privileged based on the search terms would be reviewed by the Filter Team and, if deemed nonprivileged, made available for review by the Prosecution Team.

Once discovery to Elbaz began pursuant to Federal Rule of Criminal Procedure 16, the Prosecution Team produced the nonprivileged documents to Elbaz after applying certain search terms to ensure that the documents were relevant to her case. The Prosecution Team did not manually review the documents before production, because, according to the Government, the volume was too large for it to both review each document and produce the files to Elbaz in accordance with the discovery schedule.

II. Failures in the Filter Process

In January 2018, the Government received one hard drive containing documents produced by the company Google pursuant to a search warrant (the "Google Hard Drive"). In the same time frame, it also received materials seized from the onsite execution of a search warrant at the company Spot Option in Israel, including the contents of a laptop belonging to the Chief Financial Officer of BinaryBook and related entities (the "Spot Option Hard Drive"). The Google Hard Drive was subjected to the standard protocol of applying search terms and uploading nonprivileged documents onto the FBI database. However, in June 2018, the Prosecution Team requested that the original Google Hard Drive, which contained the original documents prior to any filtering for privilege, be sent to the Prosecution Team to be processed for production to Elbaz and to be uploaded to the Relativity database. This transfer occurred at the direction of one of the trial attorneys on the Prosecution Team, who understood that an FBI review of the Google Hard Drive contents would not be complete before the agreed-upon discovery deadline and sought the original materials so they could be produced to Elbaz by that date. Although the FBI informed the Prosecution Team in an email that the materials were unfiltered and could contain potentially privileged materials, the attorney failed to review the email carefully enough to recognize that fact.

As for the Spot Option Hard Drive, although most of the contents were subjected to the filter process, the contents of the BinaryBook laptop ("the Laptop Image") were not, because the Prosecution Team inferred, based on information received from the FBI, that it contained only financial information. Thus, in order for the Laptop Image to be produced in discovery before the agreed-upon discovery deadline, the Prosecution Team did not request that it undergo filtering before it was made available to the Prosecution Team in the Relativity database and to Elbaz. As a result, the unfiltered contents of the Google Hard Drive and the Laptop Image, consisting of approximately 20,000 documents, were uploaded to the Relativity database, with the result that the Prosecution Team had access to potentially privileged documents from the Google Hard Drive beginning in July 2018 and from the Laptop Image beginning in September 2018. Because relevant documents from these sources were copied and forwarded to Elbaz's counsel in discovery, Elbaz had access to the same potentially privileged documents, even though she did not hold a privilege in all of them. This mistake — uploading unfiltered materials to the Relativity database — occurred out of an effort to provide Rule 16 discovery in accordance with the agreed-upon schedule and out of a belief that the Laptop Image did not contain potentially privileged communications.

The Government did not realize that the Prosecution Team had access to these thousands of potentially privileged materials until approximately December 6, 2018. When it did, the Filter Team immediately informed Elbaz's counsel and suspended the Prosecution Team's access to the potentially privileged documents. The potentially privileged materials, however, had been accessible to the Prosecution Team for a period of approximately five months.

The Relativity database has an audit function whereby the Filter Team was able to identify which of the thousands of potentially privileged materials had actually been viewed, printed, or both by a member of the Prosecution Team. While the Relativity database does allow for documents to be "previewed" in a way that does not leave an electronic record of access to them, that feature was used by only one paralegal to locate documents other members of the Prosecution Team had previously identified, and any documents that were printed after review using the preview function would have been captured in the audit. Using the audit function, the Filter Team determined that members of the Prosecution Team accessed a total of 41 potentially privileged documents from the hard drives, constituting 22 unique documents or email chains.

After identifying the privilege issue, the Filter Team undertook a comprehensive review and discovered that the Prosecution Team had been granted access to additional materials that had not been screened for privilege. After Elbaz's arrest in September 2017, her cell phone was seized and later searched, and texts from the WhatsApp text message application were downloaded as part of that search. Although these text messages were never filtered for privilege, they were made available to the Prosecution Team. In their review, the Filter Team identified 10 WhatsApp chats as potentially privileged. Because the chats were not housed in the Relativity database due to incompatibility of file formats, no audit function exists to determine if any member of the Prosecution Team viewed or reviewed these chats. The Filter Team has therefore presumed that a member of the Prosecution Team has viewed them for purposes of this Motion.

The Filter Team also discovered that certain summary and full translations of material in Hebrew had not been filtered for privilege and contained potentially privileged information. Many documents obtained by the Government in the course of its investigation are in Hebrew. Although the emails in Hebrew generally contained English fields for the sender, recipient, and subject lines to which the filter search terms were applied, the FBI database, where the filter...