Court filing

TRANSCRIPT of Proceedings as to Martin Kao - held on 2/14/2023, before… — PPP Attempt Conspiracy Legal Filings (Dkt. 97)

No. 1:21-cr-00061-LEK · Doc. 97 · Docket on CourtListener

Summary

A transcript of a February 14, 2023 motion hearing in United States of America v. Martin Kao, No. 1:21-cr-00061-LEK, in the U.S. District Court for the District of Hawaii before Magistrate Judge Rom Trader, filed March 24, 2023 as Document 97. The motion, by PacMar Technologies LLC, formerly known as Martin Defense Group, seeks return of cell phone data under Rule 41(g) of the Federal Rules of Criminal Procedure. Jesse W. Schiel for PacMar argues that the phone was a company phone covered by company policies, that the government is not opposing release of the data, and that the company, a federal contractor with 150 plus employees, needs it. The objection comes from the defendant, through Victor J. Bakke and Michel A. Okazaki, on privacy and Fifth Amendment grounds; Craig S. Nolan appears for the government. The proceedings concluded at 10:18 a.m.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 1 of 34 PageID.806

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII

)
UNITED STATES OF AMERICA, ) Case No. 21-CR-00061-LEK-1
)
Plaintiff, ) February 14, 2023
) 9:32 a.m.
vs. )
)
MARTIN KAO, )
) U.S. District Court
Defendant. ) 300 Ala Moana Boulevard
______________________________ _ ) Honolulu, HI 96850

TRANSCRIPT OF MOTION HEARING RE MOVANT PACMAR TECHNOLOGIES LLC'S
MOTION FOR RETURN OF PROPERTY PURSUAN TTO 41(G) OF THE FEDERAL
RULES OF CRIMINAL PROCEDURE AS TO MARTIN KAO
BEFORE THE HONORABLE ROM TRADER
UNITED STATES MAGISTRATE JUDGE

APPEARANCES:

For the Plaintiff: Craig S. Nolan, Esq.
U.S. Attorney's Office
300 Ala Moana Boulevard, #6100
Honolulu, HI 96850

For the Defendant: Victor J. Bakke, Esq.
700 Bishop Street, Suite 2100
Honolulu, HI 96813

For Interested Party Martin Michel A. Okazaki, Esq.
Kao: 370 Kawaihae Street, Apartment E
Honolulu, HI 96825

For PacMar Technologies LLC: Jesse W. Schiel, Esq.
Kobayashi Sugita & Goda
999 Bishop Street, Suite 2600
Honolulu, HI 96813

Transcription Service: Jessica B. Cahill, CER/CET-708
Maukele Transcribers, LLC
467 Maukele Place
Wailuku, Maui, HI 96793
Telephone: (808)298-8633

Proceedings recorded by electronic sound recording;
transcript produced by transcription service.
2
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 2 of 34 PageID.807

1 FEBRUARY 14, 2023 9:32 A.M.

2 THE CLERK: The United States District Court for the

3 District of Hawai'i, with the Honorable Magistrate Judge Rom

4 Trader presiding, is now in session. The gallery may be seated.

5 Criminal number 21-00061-LEK, United States of America

6 v. Defendant (01) Martin Kau. This case has been called for a

7 motion hearing. Counsel, your appearances for the record,

8 please, starting with the Government.

9 MR. NOLAN: Good morning, Your Honor. Craig Nolan for

10 the Government.

11 MR. BAKKE: And good morning, Your Honor. Attorney

12 Victor Bakke on behalf of the Defendant, who's present in court.

13 Also present, Your Honor, I would ask to have a special

14 appearance is Attorney Michael Okazaki. He's working -- he's

15 Martin Kau's lawyer on the civil side. He's the one that

16 assisted in -- actually, he's the one that wrote the motion, Your

17 Honor, and I filed it because this is a lot of history that I

18 didn't have privilege too. So I would ask that he be here to

19 argue the motion as well.

20 THE COURT: All right. Any objection to that?

21 MR. NOLAN: No, not from the Government.

22 MR. SCHIEL: None from PacMar.

23 THE COURT: All right.

24 MR. SCHIEL: And good morning, Your Honor. Jesse

25 Schiel for Movant PacMar Technologies, LLC, formerly known as
3
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 3 of 34 PageID.808

1 Martin Defense Group.

2 THE COURT: All right. Good morning, folks. Have a

3 seat. We're here on the Movant's motion. I'll take judicial

4 notice of the records and files in this case. I'm aware, Mr.

5 Kau's pending sentencing, I believe it just got moved; did it

6 not, until September or something like that, Mr. Bakke?

7 MR. BAKKE: Yes, Your Honor.

8 THE COURT: All right. And then beyond that, Mr.

9 Nolan, there's a second pending criminal investigation or case

10 that he's been charged in?

11 MR. NOLAN: Correct, Your Honor.

12 THE COURT: All right. And the evidence as it relates

13 to the phone data relate to that particular case as well, right?

14 MR. NOLAN: So, yeah. It's our position that the phone

15 data relate to both the case pending sentencing and the case

16 pending trial.

17 THE COURT: Okay. All right.

18 MR. BAKKE: And, Your Honor, for the Court's

19 information, though, he also has pled guilty in the District of

20 D.C., on a campaign theft.

21 THE COURT: Okay.

22 MR. BAKKE: And so that could be part of that. I'm not

23 the attorney on that. He has a public defender in D.C., but --

24 THE COURT: Sure. Okay. Thank you. I just want to

25 make sure I got an idea of what the landscape looks like. Okay.
4
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 4 of 34 PageID.809

1 All right. And so with that, I've reviewed the motion,

2 the Government's response, Defendant's opposition, as well as the

3 reply. I've reviewed the exhibits. I've taken a look at some of

4 the cases that were cited. I can't say I've looked at them with

5 a fine tooth comb, but I did review at least a couple of them.

6 Beyond that, the operative rule, which is 41(g). And with that,

7 I think I waive everything. So it's your motion, Mr. Schiel.

8 MR. SCHIEL: Sure. Thank you, Your Honor. And I won't

9 reiterate everything. I'll just hit some of the salient points

10 and can answer any questions you may have.

11 As you know, we're moving under 41(g) -- Rule 41(g),

12 which allows a non-party that's allegedly been aggrieved by the

13 seizure of its property to have its property returned. That's

14 the case here. The rule has also been interpreted to include

15 petitions for property that -- where the property has rightfully

16 been seized by the Government, and that's the case here as well.

17 We're not asserting that the property was wrongfully or

18 unlawfully seized by the Government.

19 We've set forth the standard in the motion that has

20 some factors that the Court can consider, but, frankly, those are

21 more applicable when the Government is opposing the requested

22 release. For instance, one of the factors is whether, you know,

23 the Government is -- you know, whether the Government has been

24 derelict in some way, and these sorts of things. We're not

25 alleging any of that. And the Government isn't opposing the
5
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 5 of 34 PageID.810

1 release of the requested cell phone data to us -- to PacMar. The

2 objection, of course, here is coming solely from Defendant, Mr.

3 Kau. And I'll get to some of those objections, and we responded

4 to them in our reply.

5 But I want to get to what we consider to be the

6 undisputed facts that are pertinent to the Court's analysis and

7 ultimate decision.

8 One is that the cell phone is not Mr. Kau's personal

9 cell phone. That's not asserted in the opp because it's not the

10 case. It's a company cell phone. It was issued to him as any

11 company cell phone is. Paid for by the Company, that's

12 undisputed.

13 And so we would submit that the fact that the cell

14 phone is company property, covered by its policies, is

15 undisputed. The company's handbooks and policies and procedures

16 make it clear that all the work that's done on the company

17 resources electronic devices is the company's property and is

18 assigned to the Company. We've cited those provisions in our

19 motion, reiterated the same in our reply memorandum. And that

20 the sensitive information stored on electronic devices such as

21 the company cell phone remain -- and this is verbatim -- remain

22 the sole property of the company.

23 Mr. Kau acknowledges that these policies existed. He

24 was the company President and CEO at the relevant times in

25 question. He certainly would be imputed to have that knowledge.
6
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 6 of 34 PageID.811

1 But he also signed an acknowledgement and that's undisputed.

2 Regarding the arguments that are raised in the

3 opposition, just briefly on that. He doesn't dispute any of

4 those facts. Rather, he turns his attention to asserted rights

5 of privacy to the data and the cell phone Fifth Amendment

6 privilege type arguments, okay. But we think these are misplaced

7 and we've explained why in the reply.

8 First, there's no expectation of privacy in your

9 company cell phone, particularly where the company policies and

10 procedures make that clear. It's no different than the emails on

11 the server that were seized by the DOJ in connection with their

12 criminal actions against Mr. Kau, and those servers have been

13 returned to the company. The company has Mr. Kau's business

14 emails and personal emails that were on the server. Emails and

15 text messages on his company's cell phone are no different.

16 That's our view.

17 Second, because he has no expectation, a reasonable one

18 anyway, of privacy on his company business cell phone that's been

19 seized, there's no need for Mr. Kau to testify regarding whether

20 he had an expectation of privacy or not as to certain emails

21 versus other emails or text messages, versus others. In fact,

22 the DOJ already has all of that data. We're not asking them to

23 return it and forever relinquish control.

24 The DOJ has made it clear they're going to keep the

25 cell phone as evidence in their pending cases as Mr. Kau.
7
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 7 of 34 PageID.812

1 They're going to keep the data that's been converted through

2 Cellebrite, as we understand it, and they're going to give us a

3 file that we can use and for the purposes that we've explained in

4 our motions. It's our company data and as a federal contractor,

5 the company is entitled to that and in fact needs it.

6 There's arguments raised in the opposition about

7 whether 41(g) is a proper vehicle for this request. We think

8 those are really misplaced. We obviously don't need a subpoena

9 to get our property back. We don't need a FOIA, through the

10 Government, for that purpose. We're moving under the correct

11 rule. There's case law to support that.

12 So for all those reasons, Your Honor, we'd ask that the

13 motion be granted.

14 THE COURT: All right. Can you help me with one of the

15 discretionary factors that the Court has to consider? And that's

16 the second one, which is to the extent that your client PacMar,

17 is likely to suffer irreparable injury if it's not returned, I

18 think you fleshed it out a little bit, but just to make sure that

19 I'm not missing anything, can you sort of clarify or further

20 expound on that, please, Mr. Schiel?

21 MR. SCHIEL: Sure. I'm not going to abandon arguments

22 about why we are suffering irreparable harm or prejudice from the

23 imminent need of this data, but I will note, as I stated earlier,

24 that I think that analysis is more pertinent when the Government

25 is opposing the request. But we would still argue that, you
8
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 8 of 34 PageID.813

1 know, based on the fact that PacMar Technologies is a federal

2 contractor, it's research and development. Primarily it's

3 sources of revenue and business. It has security clearances. It

4 has suspension environment considerations to consider. There are

5 all sorts of reasons why it needs to have the policies it has in

6 place in order to monitor and know what its employees are doing.

7 And this is particularly so when you're talking about a former

8 employee who's committed criminal acts or allegedly so, and

9 who's, in fact, pled to several counts of criminal acts.

10 The company needs to have that data to know what's

11 occurred in totality, so it can take appropriate actions to

12 protect itself and be in front of any type of misdeeds that Mr.

13 Kau committed. And so that would be the immediate need for the

14 data.

15 THE COURT: Then I would like you to touch on one thing

16 before I ask for the Defendant's view on this. But to the extent

17 that they've sort of harped on the fact that it's been some two

18 years or what have you prior to this request being made and

19 extensively throughout that time period you didn't have that

20 data, all right.

21 And, you know, as far as -- and not to the extent that

22 there's an urgency component to these factors that the Court has

23 to consider, but just from a common sense point of view, how is

24 it that the Court should view that sort of circumstance? As far

25 as the last couple of years having gone by, no request having
9
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 9 of 34 PageID.814

1 been made, and now you folks are saying that we need it back?

2 And I don't have any fundamental principle difference with you,

3 Mr. Schiel, that it's the company property, okay. I just want to

4 make sure that I'm considering all the different factors.

5 So could you speak to that particular piece? And if

6 they hit on it again, I might have to come back to you, but I

7 just want to get your first read on that.

8 MR. SCHIEL: Understood. Thank you. To be clear, you

9 know, everything was moving quickly in the beginning, and we had

10 a PPP fraud case that we were dealing with, expelling him as a

11 manager and president of the company. There was civil litigation

12 that was really surrounded around those issues and then

13 subsequently with the political fraud aspect as well.

14 During the course of those proceedings, the company had

15 felt that it had uncovered the misdeeds that supported -- you

16 know, they ultimately are relevant to the PPP fraud case that Mr.

17 Nolan and the DOJ are prosecuting, but also to the justifications

18 for expelling him as a manager of the company based on those

19 misdeeds. What's occurred most recently with more indictments,

20 it seems like every time, you know, you open the newspaper,

21 there's something new about Mr. Kao and what he's done. And it's

22 occurred to them, and, you know, when they've made the request to

23 us, the date, they need it, and I can understand why.

24 It would have been nice to have made that request

25 earlier, yes, but it doesn't change the fact that there's an
10
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 10 of 34 PageID.815

1 urgent need for it. The company has, you know, 150 plus

2 employees. They're very much active in federal contracting, and

3 they need to know what's occurred. And so for that reason,

4 particularly with new misconduct now being alleged, they need to

5 get to the bottom of some things.

6 THE COURT: All right. Thank you, Mr. Schiel.

7 MR. SCHIEL: Thank you.

8 THE COURT: All right. So with that, Mr. Nolan, I

9 think I know what your position is. Anything further?

10 MR. NOLAN: Let me give you five sentences --

11 THE COURT: Sure.

12 MR. NOLAN: -- just so you have a complete factual

13 background.

14 So you know we -- the Court knows we seized this phone

15 pursuant to warrant.

16 THE COURT: Okay.

17 MR. NOLAN: We extracted the data from it using a

18 number of tools, including Cellebrite. That data can be viewed

19 using a Cellebrite tool, a reader. You can search and that kind

20 of thing. The Government can produce a copy of the extracted

21 data with a Cellebrite reader so that anyone can do the same sort

22 of searching that we can do.

23 I will tell you, I reviewed a limited amount of the

24 data, and there is both, as one would expect, items that appear

25 to be purely personal in nature and items that squarely appear to
11
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 11 of 34 PageID.816

1 be business in nature. PacMar is agreeable to us producing only

2 the data and not the phone. The reason for that, primarily, is

3 the phone was used to facilitate some of the crimes. And on top

4 of that, unlike a computer that we can make a pure copy of and

5 give it back to them, the computer itself, and there's no

6 difference between the two, the tools for phone forensics don't

7 extract a complete copy. They don't image the phone. They

8 extract the data they can. And those tools, Cellebrite in

9 particular, updates. I don't know if it's yearly, semiannually.

10 And so if we needed to, we could use the latest version

11 of Cellebrite to go back and take a deeper look. Depending on

12 how the case is going, we might or might need -- might or might

13 not need additional legal process.

14 And then, finally, I would say, I know that Mr. Kau's

15 counsel has asked for an opportunity to view it, perhaps. I just

16 want to make clear to the Court that it would be extremely

17 burdensome for the Court to ask the Government to segregate what

18 appears to be personal information from business information.

19 First of all, it would require a number of judgment

20 calls that the company and Mr. Kao are better positioned to make.

21 Second of all, as you know, there's a huge amount of data, and we

22 just don't have the resources to do something like that.

23 Otherwise, we see this almost like an interpleader action, and

24 that here's the data, and we ask the Court to figure out where it

25 should go at this point.
12
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 12 of 34 PageID.817

1 THE COURT: All right. Thank you.

2 MR. NOLAN: Thank you.

3 THE COURT: All right. I'll hear from the Defense.

4 MR. BAKKE: Your Honor, if I can comment on it from the

5 criminal side, which is that this was recovered as part of a

6 search warrant in this active case. As the Court knows, there's

7 still a pending case.

8 So, as the Prosecutor just said, it may be that in that

9 criminal case, the Public Defender who's present in court today,

10 she's watching, she has the case, they may want to take that and

11 say, hey, wait a minute, now we can get to the phone or there's

12 something more in there. So this is still an active

13 investigation, and the Defendant has his rights to that.

14 As far as security goes, I mean, the Government has the

15 phone, so we don't have an exigency circumstance where we're

16 worried about destruction of the item or tampering with the item

17 or anything like that. So that goes back to the -- to PacMar's

18 argument, which is that they need it. They don't need it. They

19 want it, and there's a difference. And they want it because

20 they're doing this civil case.

21 They went through a whole binding arbitration and never

22 asked for it, and that was resolved completely. And as far as I

23 know, PacMar is not being accused of any wrongdoing, criminally

24 or civilly. So there's nothing that they have to defend

25 themselves against. They are strictly on the attack, and they
13
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 13 of 34 PageID.818

1 are coming in and trying to get this.

2 So the question is, why can't they wait? The evidence

3 is safe, or the information is safe. And I don't think they've

4 met their burden to do it. But again, coming from the criminal

5 side, Judge, is these matters aren't done yet. And D.C., I don't

6 even know what's on the phone regarding possible phone calls to

7 senators and whoever, and we still have sentencing in both

8 matters. And we don't even have the presentence report yet, at

9 least here in our district.

10 So I don't know what's going to come up, and I don't

11 know if that phone is going to be an issue and if we need to go

12 in and reevaluate it, but we need it there if we can.

13 THE COURT: Okay. But to the extent that the phone is

14 not up for grabs right now, the data is what really we're talking

15 about. So to the extent that if the ask was turn over the phone

16 and that was a disputed call, hypothetically, between the

17 Government and the Movant, the purported owner of the phone and

18 the data, that would be different. Because then I can totally

19 understand where there would be concern in the future. Because

20 it may be there, but if you can't find it now versus being able

21 to run newly improved software I always get nervous when there's

22 software updates that come along. I'm not a particular fan. If

23 it's working, I'm generally happy.

24 But, long story short, bottom line is I think that's a

25 different situation, Mr. Bakke. And beyond that, I'm trying to
14
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 14 of 34 PageID.819

1 make sure that I'm following your argument.

2 MR. BAKKE: Correct, Your Honor. My response to that

3 would be that, first of all, who's going to go through these

4 mounds of massive amount of, quote, "data" to determine what is

5 personal property, what is not, what may be incriminating to him?

6 The Government's saying they don't have the resources to really

7 do it, and, quite frankly, they don't have the -- well, not

8 motive, but they don't have the interest in it. This is not

9 their fight. And I don't think the Court should be basically

10 getting into what is turning into a civil discovery issue.

11 THE COURT: Well, you know, this is one of those weird

12 little animals that pops up, right? And that's the reason why

13 Rule 41(g) exists, because it recognizes there are situations

14 when the Court is asked to strike a balance and equitably parse

15 through this and balance the various rights. And like most

16 times, right when people leave the courtroom, chances are good

17 someone's not happy and someone is.

18 And so it's just my role to try to look at the discrete

19 issues that are presented based upon what I got now and make the

20 call. And so that's what I intend to do, Mr. Bakke.

21 MR. BAKKE: Your Honor, and I'm sorry. That's why I

22 said I was coming from the criminal side. I agree. This is a

23 unique case. I don't think it would even be a question if he

24 didn't have one pending case for trial and two for sentencing. I

25 mean, that's what really makes this case different. Otherwise,
15
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 15 of 34 PageID.820

1 if everything was done and PacMar just wanted to say, hey, we

2 want the copy directly from you. We don't want you giving it

3 back to the defense, and maybe it disappears, maybe it gets

4 tampered with, that would be a different issue.

5 But here because everything is still going on, and this

6 item was seized as evidence -- because not only did they not --

7 PacMar not ask for it, the Prosecutor never gave us the phone

8 either. And I believe Ms. Panagakos, prior counsel, and correct

9 me if I'm wrong, asked for the phone. The phone was never turned

10 back over.

11 I don't know what the reason for that is, but that's

12 what changes this whole thing, Your Honor, which is why I'm

13 saying we should wait because of the balancing between waiting

14 and protecting Mr. Kau in an active case, versus PacMar's two and

15 a half year request just so that they can come after him civilly,

16 I don't think -- I think that balance falls on the side of the

17 Defendant.

18 THE COURT: Okay. And before I hear from Mr. Okazaki,

19 okay, if he cares to, Mr. Nolan, if you just can clarify that one

20 point with regard to the status of the phone and data. I presume

21 that -- well, speak to what Mr. Bakke had raised.

22 MR. NOLAN: Sure. There have been so many different

23 attorneys to represent Mr. Kau in the PPP fraud matter. I don't

24 recall whether Ms. Panagakos asked for the phone. If she asked

25 for the return of the phone, I can guarantee you I said no
16
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 16 of 34 PageID.821

1 because I always do in cases like this. The phone has been

2 available for inspection by the Defense since shortly after the

3 arrest.

4 The initial discovery was probably October of 2020. If

5 not, it would have been November 2020, and that would have been

6 preindictment discovery because we complained on Mr. Kao and

7 talked a lot with his various attorneys, and that was only, I'm

8 going to say, April 2021 or so, where we indicted him, and

9 discovery was actually lawfully due.

10 So I don't recall the Defense ever asking for a full

11 extraction. If they wanted it, we would have made it available

12 to them. It requires -- literally requires a hard drive.

13 Actually, a two, three, four terabyte drive is usually what we

14 request. So it's been available for inspection.

15 This is not the kind of -- based on the case, I can see

16 why the Defense might not have asked for a full extraction in

17 this case because there was a ton, hundreds of thousands of pages

18 that we produced that would have been redundant, you know,

19 because his work email is on the phone, but it's also on the

20 servers and on his computer. And we got all that through

21 subpoena and search warrant.

22 THE COURT: Okay. Got it.

23 MR. NOLAN: Thank you.

24 THE COURT: All right. Anything further?

25 MR. SCHIEL: I do.
17
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 17 of 34 PageID.822

1 THE COURT: Hold on.

2 MR. SCHIEL: I don't know who you're pointing at,

3 sorry.

4 MR. OKAZAKI: Okay. Yeah.

5 THE COURT: Mr. Okazaki, go ahead.

6 MR. OKAZAKI: Yeah. Thank you, Your Honor, for letting

7 me --

8 THE COURT: I didn't want you to feel left out.

9 MR. OKAZAKI: Thanks. Yeah, so we just heard from Mr.

10 Nolan, who described, you know, the phone was taken by a search

11 warrant. They use this Cellebrite. I assume it's some type of

12 forensic tool that's able to go through a phone. And he

13 testified that they have a lot of data. And he stated that some

14 of the data is personal in nature. Obviously, personal in nature

15 and other data, he concluded, was also business.

16 Given the volume of the data and the fact that we know

17 there's personal information, I don't think a solution can be to

18 just turn it over to PacMar. There's got to be -- you know, we

19 have a case here of a phone that has personal information, you

20 know, some business information, and it's being requested here

21 under the context of a Rule 41, which basically comes down to

22 ownership. And I don't think it's as simple as saying, oh, the

23 company was paying the installment payments on this phone, so

24 it --

25 THE COURT: Well, it's much more than that. It's
18
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 18 of 34 PageID.823

1 basically the terms of use under which that cell phone was

2 provided to Mr. Kau, right.

3 MR. OKAZAKI: Well --

4 THE COURT: It's different if they gave him the phone

5 and didn't tell him anything about it. But, you know, certainly

6 what they're arguing is, look, our policies are clear. You knew

7 that by using this, that everything and anything gets generated

8 is our property. And to the extent that there's some limited

9 personal use, that's fine, but it's going to be treated the same

10 way. That's my understanding.

11 So that's different than simply saying, hey, look,

12 we're making the payments on it, and there's no other -- the

13 scope of the use is not otherwise further defined.

14 MR. OKAZAKI: Okay. If I can address that, then, Your

15 Honor?

16 THE COURT: Sure.

17 MR. OKAZAKI: I don't construe any of these handbooks,

18 documents or policies as being that broad. I have some excerpts

19 here that I brought with me. There is a policy on cellular

20 phones, which I view as mostly relating to, you know, trying to

21 prevent abuse of use of a phone. Like, don't text while you're

22 driving.

23 THE COURT: Yeah.

24 MR. OKAZAKI: Now, there is -- on the next page, I

25 noticed there's actually an email policy. And this policy is
19
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 19 of 34 PageID.824

1 actually quite different from the phone policy because it

2 actually says the company reserves the right to access and

3 disclose, as necessary, all messages sent over its email system.

4 So that's very clear.

5 You know, as far as a phone goes, I don't see anything

6 in any of the documents that says everything on your cell phone,

7 including pictures, including notes you may have, notes that may

8 include, you know, doctor's appointments, things about your

9 children that is company property and can be viewed at any time

10 by the company whenever it pleases, with or without cost. I

11 don't see anything like that.

12 I also was looking at the NDG mobile device policy.

13 The copy I have here that was filed, I don't see any signature on

14 it, and I don't see anything in here that says everything on your

15 cell phone is company property. I think what we're dealing here

16 is with reasonable expectations of privacy. And as we pointed

17 out in the moving papers, it is recognized that cellular phones

18 are entitled to, I would say, you know, an additional degree of

19 protection and privacy just because of the nature of the phone

20 and, you know, how everybody relies on phones.

21 THE COURT: So if it was up to you then, you would urge

22 the Court to somehow account for that and do precisely what Mr.

23 Nolan is saying is going to be a big burden for the Government to

24 parse through and segregate out personal from business. That's

25 what you're kind of suggesting, right?
20
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 20 of 34 PageID.825

1 MR. OKAZAKI: Well, you know --

2 THE COURT: And notwithstanding how difficult it may

3 be, Judge, the thing being is that my guy's right to privacy,

4 from your standpoint, trumps all that. It doesn't make any

5 difference how much of a pain it is. That's what needs to be

6 done to ensure that his rights are afforded to him. That's

7 basically your position, right?

8 MR. OKAZAKI: Basically. I mean, like I said, I don't

9 think the solution can be that there's just so much data that we

10 just have to hand it over. I can't see that being the solution.

11 And, you know, as far as the urgency, you know, as Mr.

12 Bakke said, it's been two and a half years. In our view, this is

13 -- they're using this Rule 41 to get discovery that they would

14 not be given in one of their civil cases.

15 THE COURT: All right.

16 MR. OKAZAKI: I mean, they have a RICO case going on

17 right now that basically mirrors, you know, all the criminal

18 allegations.

19 THE COURT: Okay.

20 MR. OKAZAKI: If somebody in a civil case said, I want

21 to access someone's phone, and use Cellebrite, and get everything

22 that's on it, I think there would be a lot of objections. And I

23 can see that -- I can't see a court saying, yeah, you can go take

24 whatever you want from someone's phone.

25 THE COURT: All right. Mr. Schiel, I'll give you the
21
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 21 of 34 PageID.826

1 last word.

2 MR. SCHIEL: Thank you. I'll be short here. I think,

3 you know, with all due respect, counsel is focusing on other

4 provisions of the documents that we've attached as our exhibits

5 and focusing where maybe it's not specific as the data, but it's

6 just talking about what you can and can't do on your cell phone.

7 But then you get into, for instance, the handbook C-23

8 and 24. They make it very clear. When you use these devices,

9 such as a cell phone or your email server, yeah, sometimes you're

10 going to do personal stuff, but we don't draw a line. I mean,

11 it's very clear.

12 It says, incidental and occasional personal use of

13 email is permitted by the company, but these messages will be

14 treated the same as the other messages. And it goes on to say,

15 since your personal messages can be accessed by company

16 management without prior notice, you should not use email to

17 transmit any messages you would not want read by a third party.

18 Let me make it clear, you don't get to draw the line. You don't

19 get to segregate.

20 So I would submit that, yeah, it is going to be

21 incredibly burdensome, but there's -- why go through that type of

22 effort when there really is no expectation of privacy and what

23 we're talking about?

24 THE COURT: All right.

25 MR. SCHIEL: Thank you.
22
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 22 of 34 PageID.827

1 THE COURT: Thank you. All right. Mr. Bakke, I see

2 you actively engaged with your client. Anything else you want to

3 add before I rule?

4 MR. BAKKE: Your Honor, I appreciate that. As you can

5 see, we're kind of cramped in here, so Mr. Kau is sitting behind

6 me, and he's been listening. He wants to make a statement to the

7 Court. I'm advising him not to, but I'll leave it up to the

8 Court.

9 THE COURT: All right. Mr. Kau, I always am a firm

10 believer that while the decisions that the Court makes are not

11 always ones that people agree with, okay, it's generally better

12 to have more of the relevant information in trying to make those

13 decisions. It's not a perfect world, because you have rights,

14 okay. Mr. Bakke has been at this for a long time, okay. I've

15 been around a little while as well, And I would strongly urge

16 you to follow his advice.

17 There's a reason why individuals such as yourself that

18 find, in this case, pending sentencing, pending trial in at least

19 one case -- other case here, and I guess there's the other case

20 that's elsewhere, I forget what the status is. You want to make

21 sure that you do everything possible not to make your situation

22 any worse.

23 So I understand you want to make a statement, but I'm

24 not going to permit you to do so. And I'm not doing this because

25 I'm trying to be rude to you. It's not because I don't think you
23
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 23 of 34 PageID.828

1 have something that you feel that should be said. It's just in

2 this situation, I don't think it would be in your interest. And

3 I don't want to have a situation wherein your zeal to provide a

4 statement here today you do something that actually is damaging

5 or creates more problems for you overall. So with all due

6 respect, Mr. Kau, okay. Thank you.

7 All right. The Court's carefully consider the merits

8 of the instant motion within the context of the motion, the

9 Government's response, the opposition by the Defendant, as well

10 as the reply to include the declarations that were submitted and

11 the exhibits. And going through company handbooks is not exactly

12 my favorite reading, but I did endeavor to go through all of the

13 relevant portions of this.

14 First and foremost, I recognize that this is sort of an

15 imperfect situation, okay, but bottom line is that this is the

16 property of the Movant PacMar. They paid for the phone, they

17 provide it to their employees to use the phone subject to terms

18 of use. And, without surprise, anyone that's provided a phone,

19 whether you're five years old or 100 years old, chances are no

20 matter what they tell you, the lines are going to get blurred on

21 personal and business use. That was anticipated by PacMar. It

22 was included in the policies.

23 Rule 41(g) is one of those provisions where it exists

24 so that the Court can endeavor to strike a balance when property

25 is seized, okay. And here the Court believes that PacMar has met
24
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 24 of 34 PageID.829

1 the requirements of the rule because the rule authorized the

2 return a property on behalf of any aggrieved person. PacMar

3 clearly qualifies as an aggrieved party in this particular case

4 because they have been deprived of physically the phone, but more

5 importantly, the data on that phone.

6 On that phone, certainly, I have no doubt that there

7 was probably a fair bit of personal data, whether they are

8 contacts, text messages, pick up the kids, photographs, whatever

9 it may be. There's lots of things that are probably on there.

10 But if they're on there, they're on there, because Mr. Kau, who

11 had control over that, made a choice within the context of the

12 terms of use to put that on there. He was told that there was no

13 expectation that he should -- that those things would be treated

14 other than in an open way as it relates to the company. The

15 company had every right to inspect the phone, ask that it be

16 returned, and it was provided for work purposes.

17 So the Court finds that the various factors that it has

18 to consider in a discretionary fashion appear to have been met.

19 I do have some question with regard to whether or not PacMar is

20 likely to suffer irreparable injury if it's not returned,

21 because, you know, the timing of all this. I mentioned that

22 earlier, and that was a question I put to Mr. Schiel.

23 And ultimately, though, the company does have an

24 interest somewhat like the military in good order and discipline,

25 you know, to make sure that it is aware of what information is on
25
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 25 of 34 PageID.830

1 there, what his activities were, that is Mr. Kau, and how that

2 impacts with their ongoing business and other endeavors. And to

3 the extent that there's exposure, you know, with regard to legal

4 action, criminal or otherwise, and that's something that they

5 have a right to, I think, assess. And without that, I think that

6 it's a fair argument that they may suffer injury as a result of

7 that.

8 Absent this particular rule. They just got to sit pat

9 and as the Defendant would say, hey, look, wait until

10 everything's over. I get that. That is probably the cleanest

11 way to do it. But by doing that, PacMar has its rights sort of

12 stopped on because they're asking for it now, maybe late by all

13 accounts, but they're asking for it now, and they're entitled to

14 ask for it.

15 And so, absent them bringing this motion and the Court

16 ruling on it, they really don't have much other remedy other than

17 to wait until whatever comes down the line relative to Mr. Kau's

18 activities, criminal, civil, administrative, or otherwise, are

19 finally finished. They're choosing not to do so. They have a

20 right to do that. It's something that the Defense has to be

21 concerned about, but certainly that can be managed going forward

22 in a way that I think is doable.

23 Also, to the extent that the Department of Justice

24 hasn't done anything other than, I think, be upfront about this.

25 We've got the phone. We're not going to give it to you. We're
26
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 26 of 34 PageID.831

1 happy to give you the data. They're not trying to delay

2 anything. I didn't hear anything at all in this that the

3 Government was somehow stonewalling. They've been happy to

4 provide this for quite some time.

5 And so it's a situation where you have lawfully seized

6 data and a phone. You have a party who owns that, who wants it

7 back. You have the party who -- against whom the warrant or the

8 subject of the warrant and now subject to prosecution, doesn't

9 want it turned over, at least to the extent that it requires

10 turning over of personal information.

11 But the Court finds that -- well, I'll rule this way.

12 The motion is granted. I'm going to order that the Government

13 turn over the entirety of the data that was extracted from the

14 cell phone. And to the extent that there is both business and

15 personal information on there, although I think the lines can be

16 blurred at times as to what is what, the Court is going to

17 decline to direct that there be any sort of segregation of the

18 data.

19 The data was seized pursuant to a warrant. The

20 Government has it. The company that now wants it back is

21 entitled to all of that, notwithstanding the personal nature of

22 some of the data that might be on there. And that to the extent

23 that I heard Defense arguments that, well, you know, there's no

24 signature acknowledging, or words to that effect, a specific

25 policy, that is just not something that carries much weight with
27
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 27 of 34 PageID.832

1 me. I find it very difficult to believe that the guy at the top

2 of the pyramid is disavowing specific knowledge of a particular

3 policy that he's overall in conjunction with probably others

4 responsible for implementing.

5 With that, how much time do you need, Mr. Nolan, to

6 turn over that data? I presume it can be done fairly quickly.

7 MR. NOLAN: The data is actually on the mainland.

8 That's where IRS Forensics was. So I would ask for 30 days, and

9 I would ask that PacMar probably get us a two terabyte hard

10 drive, which I'll ship to the mainland. The forensic guy will

11 load it and then ship it back here, and we'll provide it to Mr.

12 Schiel.

13 THE COURT: So the parties to further discuss. But

14 right now, I'm going to order it be turned over in 30 days, okay.

15 If there's any problems with that, obviously, the parties are

16 free to continue to work together as far as timing. But if it's

17 anything that gets too much further past that, then I'd expect an

18 update as far as what's going on.

19 Otherwise, I'm going to adopt the arguments and

20 authorities relied upon by Movant. And with that, I'm going to

21 direct you, Mr. Schiel, to prepare an appropriate order for the

22 court's review to my orders box no more than seven days. Any

23 questions, sir?

24 MR. SCHIEL: No questions. Thank you.

25 THE COURT: Okay. Mr. Nolan, any questions by you?
28
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 28 of 34 PageID.833

1 MR. NOLAN: No. Thank you, Your Honor.

2 THE COURT: Okay. Mr. Bakke, maybe you have a couple

3 of comments, I don't know, but I'll ask anyway.

4 MR. BAKKE: And having fully accepted the Court's

5 ruling, Your Honor, I'm not sure exactly what the appeal process

6 is from this ruling, but to the extent possible that we could ask

7 for a stay to allow an appeal. If it's going to take --

8 THE COURT: Well, the quicker the order comes in, and

9 then that sort of, I think, oftentimes triggers it. I'm not sure

10 if it's 14 days. I can't remember what the guidelines are. But

11 if you're going to appeal it, feel free. If I got this wrong,

12 you know -- trust me, you know, I don't begrudge you folks for

13 taking me up on it, okay? But that's my call, all right. And if

14 you want to go upstairs to Judge Kobayashi on it, you know, I

15 certainly would welcome a review. Okay.

16 MR. BAKKE: And then the last thing, Your Honor, is I

17 understand the Court's ruling is that basically you're giving

18 them everything.

19 THE COURT: Everything.

20 MR. BAKKE: Well, not giving, you're giving them you're

21 authorizing the Government to give them everything, personal and

22 data. So just for the record clear, or so the record is clear,

23 we would be officially then asking, based on that ruling, for a

24 protective order of some sort as to what can be done by PacMar

25 with information that is personal.
29
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 29 of 34 PageID.834

1 I mean, I know the Court's not requiring anyone to

2 separate it out, but I guess my argument is generally that the

3 Government seized pursuant to a warrant, stuff that they believe

4 was evidence of a crime. And so now PacMar is getting

5 everything. It seems like there should be some type of

6 restriction onto them as to what they can do with that personal

7 information.

8 THE COURT: Well, you know, there's nothing to prevent

9 you and the Movant from conferring on this point. You know, I

10 could see certain types of information, medical, for example, as

11 being something that it's well within the realm of possibility.

12 They're going to treat that in a particular way to safeguard the

13 information and not do anything else beyond that.

14 But, you know, once you get beyond that, it becomes

15 very murky. And again, I kind of go back down to -- back to,

16 under the circumstances as presented here, I find that Mr. Kao

17 had no reasonable expectation of privacy with respect to any of

18 the personal information that he might have otherwise entered

19 into transacted received using that particular device.

20 And the reason for that is that the terms of use make

21 clear, although perhaps not as clear as you folks would want it

22 phone underscore, et cetera, but I think reading all of those

23 different provisions together, it's clear that the company's

24 policies operate to put people on notice that, look, you use it,

25 it's going to be company property. And so you should understand
30
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 30 of 34 PageID.835

1 that and act accordingly. But Mr. Kao chose not to. And it's

2 not a surprise, I'm not faulting him. It just is what it is for

3 him now to come back later and say, hey, look, somehow claw that

4 back. I don't think it works that way. So on a voluntary basis,

5 you're certainly permitted to have a meet and confer on that

6 point.

7 As it relates to the appeal, you can get me that order

8 within seven days. As soon as that order is presented, I'll take

9 it and review it, and then I'll likely, subject to taking

10 further look at some of the rules, but I believe it's 14 days.

11 If I'm wrong about that, my apologies, but I'm willing to stay it

12 for review, the effect or execution of the order for that period

13 of time to review it, and then we'll go from there.

14 If it's affirmed, it's one thing. Great. If it's not

15 affirmed, then, you know, I'll get told what I did wrong and

16 there'll be a new direction we'll be heading. But either way,

17 we'll know soon.

18 Okay. All right. Thank you, folks. Anything further?

19 MR. SCHIEL: Your Honor, I just wanted to clarify on

20 the stay aspect. Is the Court making that determination now or

21 are you expressing that you would entertain a request to stay at

22 the appropriate time based on submissions?

23 THE COURT: I think -- my way of looking at it is if

24 there's an appeal, then it makes sense to stay the execution of

25 the order. Meaning that the order has to be in place so it can
31
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 31 of 34 PageID.836

1 be reviewed. But to the extent that it allows you to put your

2 hands on the data in 30 days, best case scenario, right, that,

3 obviously, would be up for review. And I think it's perfectly

4 appropriate to have that stayed pending any appeal to the

5 District Judge, okay.

6 If that appeal is not taken, then you're good to go.

7 But I think, at least for the purposes of the appeal, that they

8 shouldn't have to worry about both, because then it doesn't make

9 any sense. Is that clear enough?

10 MR. SCHIEL: Understood. Thank you.

11 THE COURT: Thank you. Anything else?

12 UNIDENTFIED SPEAKER: Yes, very quickly, Your Honor. I

13 understand you made your ruling. You know, there's not written

14 order yet, so my understanding is, you know, it's interlocutory.

15 It can be reconsidered at any time.

16 But I just wanted to state that I don't think that

17 PacMar has made a sufficient case that they own this phone. You

18 know, there's no --

19 THE COURT: What was it they were supposed to do?

20 Really bring in a receipt?

21 UNIDENTIFIED SPEAKER: I would say a purchase order or

22 something.

23 THE COURT: If there is a legitimate -- and when I say

24 legitimate, I guess it's all in the eye of the beholder, but, you

25 know, if I thought that that was a legitimate issue, you would
32
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 32 of 34 PageID.837

1 have heard from me on that. I struggle to sort of see where --

2 although going back to the beginning they can't prove it's their

3 phone, and they don't get anything. I get that. But, you know,

4 I understand your position, but I'm expressly finding, based upon

5 the totality of the information presented to me, I have no doubt

6 that that phone is the property of PacMar, and that the policies

7 that they're relying on are in place and apply to Mr. Kau.

8 UNIDENTIFIED SPEAKER: And very quickly, just the other

9 thing. You know, our ability to, you know, get into the details

10 of how the phone was acquired and how it was used and everything,

11 we can't really -- we can't do that because of the concerns about

12 the Fifth.

13 THE COURT: Yeah. I get it. And that is a valid

14 point. It's just a function of the circumstances you guys find

15 yourself in, and there's competing, you know, liabilities, right

16 or exposure. And I hear what you're saying, but there's not a

17 whole lot that I'm going to be able to do to sort of try to make

18 that any easier for you. Okay.

19 UNIDENTIFIED SPEAKER: Thank you.

20 THE COURT: All right. Guys, thanks very much. I

21 appreciate you coming in. So seven days on the order, Mr.

22 Schiel. Okay. All right. Take care. Have a good day.

23 MR. NOLAN: Thank you, Your Honor.

25 MR. SCHIEL: Thank you, Your Honor.
33
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 33 of 34 PageID.838

2 MR. BAKKE: Thank you, Your Honor.

3 THE CLERK: All rise. This honorable court stands in

4 recess.

5 (Proceedings concluded at 10:18 a.m.)

25
Case 1:21-cr-00061-LEK Document 97 Filed 03/24/23 Page 34 of 34 PageID.839 34

CERTIFICATE

I, Jessica B. Cahill, court approved transcriber, do hereby

certify that pursuant to 28 U.S.C. §753, the foregoing is a

complete, true, and correct transcript from the official

electronic sound recording of the proceedings in the above-

entitled matter and that the transcript page format is in

conformance with the regulations of the Judicial Conference of

the United States.

Dated: March 14, 2023

Jessica B. Cahill, CER/CET-708

File and source

File: gov.uscourts.hid.154417.97.0.pdf
Size: 167,081 bytes
SHA-256: 46eab991e36374147e81263cddf92dca4a200211d99711cc58f157aa64cd1d9f
Our copy: gov.uscourts.hid.154417.97.0.pdf
Original: PACER (login required)