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ORDER DENYING DEFENDANT/INTERESTED PARTY MARTIN KAO'S OBJECTIONS TO… — PPP Attempt Conspiracy Legal Filings (Dkt. 101)
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UNITED STATES DISTRICT COURT
DISTRICT OF HAWAII
UNITED STATES OF AMERICA, CR. NO. 21-00061 LEK
Plaintiff,
vs.
MARTIN KAO,
Defendant.
ORDER DENYING DEFENDANT/INTERESTED PARTY MARTIN
KAO’S OBJECTIONS TO AND APPEAL FROM DISPOSITIVE
ORDER [DOCUMENT 92] OF MAGISTRATE JUDGE
Before the Court is Defendant/Interested Party Martin
Kao’s (“Kao”) Objections to and Appeal from Dispositive Order
[Document 92] of Magistrate Judge (“Appeal”), filed on March 1,
2023. [Dkt. no. 93.] On March 23, 2023, Movant PacMar
Technologies LLC formerly known as Martin Defense Group, LLC
formerly known as Navatek LLC (“PacMar”) filed its Response to
Objections to and Appeal from Dispositive Order [Document 92] of
Magistrate Judge (“PacMar Response”). [Dkt. no. 95.] Also on
March 23, 2023, Plaintiff United States of America (“the
Government”) filed its Response to Defendant Martin Kao’s Appeal
(ECF No. 93) (“Government Response”). [Dkt. no. 96.] Kao filed
his Reply to “PacMar Technologies LLC’s Response to Objections
to and Appeal from Dispositive Order [Document 92] of Magistrate
Judge” [Document 95] (“Reply”). [Dkt. no. 98.] This matter
came on for hearing on April 13, 2023. See Minutes, filed
4/13/23 (dkt. no. 100). Kao’s Appeal is hereby denied for the
reasons set forth below.
BACKGROUND
Kao was indicted on May 6, 2021 in the U.S. District
Court for the District of Hawaii. [Indictment (“2021
Indictment”), filed 5/6/21 (dkt. no. 31).] Kao’s cellular
telephone was seized at the time of his arrest for the charges
in the 2021 Indictment. See Appeal at 1. Kao “is the former
CEO and Manager of the Martin Defense Group, LLC, fka Navatek
LLC, nka Pacmar Technologies, LLC . . . .” [Id.] Kao was
indicted in the U.S. District Court for the District of Columbia
on February 10, 2022 “for alleged campaign finance violations”
(“2022 Indictment”); [id. at 3;] and was indicted on January 5,
2023 in the U.S. District Court for the District of Hawaii for
alleged “bank fraud and forfeiture relating to” real property
located in Honolulu, Hawaii (“2023 Indictment”), [id. at 4]. On
September 7, 2022, Kao pleaded guilty to Counts 1 through and
including 8 of the 2021 Indictment before a magistrate judge.
See generally Minutes - EP: Video-Teleconference (VTC) on Motion
for Withdrawal of Not Guilty Plea and to Plead Anew, filed
9/7/22 (dkt. no. 76). Kao’s pleas of guilty were accepted by
this Court and he was adjudicated guilty of Counts 1 through 8
on September 22, 2022. See Acceptance of Plea of Guilty,
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Adjudication of Guilt and Notice of Sentencing, filed 9/22/22
(dkt. no. 79). Sentencing on Counts 1 through 8 is currently
schedule for November 7, 2023. See EO, filed 2/6/23 (dkt.
no. 88).
On January 24, 2023, PacMar filed its Motion for
Return of Property Pursuant to Rule 41(g) of the Federal Rules
of Criminal Procedure (“PacMar Motion”). [Dkt. no. 82.] On
February 15, 2023, the magistrate judge entered the Order
Granting Motion for Return of Property Pursuant to Rule 41(g) of
the Federal Rules of Criminal Procedure (“2/15 Order”). [Dkt.
no. 92]. In the Appeal, Kao objects to the 2/15 Order on
numerous grounds: that the magistrate judge erred in entering an
order; that PacMar’s Motion was a dispositive pretrial motion
and thus the magistrate judge erred by ruling on it without a
referral and/or issuing his findings and recommendations
(instead of an order); that the magistrate judge erred as a
matter of law in determining that Kao did not have a privacy
interest in the cellular telephone and the contents of its data;
that Kao is being penalized for invoking his right against self-
incrimination; that the magistrate judge erred as a matter of
law by refusing to stay the request for return of property until
Kao’s criminal case is over; that PacMar’s employment handbook
does not give PacMar an ownership interest in the cellular
telephone’s data; that the magistrate judge erred by giving
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PacMar the Government’s work product, namely the evidence
contained in the Cellebrite Extraction Reports;1 that the
magistrate judge failed to protect Kao’s right to privacy; that
the magistrate judge erred by ruling without first reviewing the
contents of the data released for removal of personal
information such as health information and personal search
history; and the magistrate erred by failing to implement less
drastic alternatives to a complete production, including
appointing a special master.
STANDARD
Under 28 U.S.C. § 636(b)(1)(A):
a judge may designate a magistrate judge to hear
and determine any pretrial matter pending before
the court, except a motion for injunctive relief,
for judgment on the pleadings, for summary
judgment, to dismiss or quash an indictment or
information made by the defendant, to suppress
evidence in a criminal case, to dismiss or to
permit maintenance of a class action, to dismiss
for failure to state a claim upon which relief
can be granted, and to involuntarily dismiss an
action. A judge of the court may reconsider any
pretrial matter under this subparagraph (A) where
it has been shown that the magistrate judge’s
order is clearly erroneous or contrary to law.
(emphasis added). Because the Appeal concerns a motion to
return property and not, for example, a motion to suppress, the
clearly erroneous standard applies. “Applying this standard, ‘a
1 Cellebrite is a Department of Justice forensic tool, which
is used to extract data and such data is sometimes used in
relation to criminal prosecutions. See Appeal at 14.
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reviewing court must ask whether, on the entire evidence, it is
left with the definite and firm conviction that a mistake has
been committed.’” In re Optical Disk Drive Antitrust
Litigation, 801 F.3d 1072, 1076 (9th Cir. 2015) (some internal
quotation marks omitted) (quoting Easley v. Cromartie, 532 U.S.
234, 242, 121 S. Ct. 1452, 149 L. Ed. 2d 430 (2001)).
DISCUSSION
Fed. R. Crim. P. 41(g) governs motions to return
property in a criminal matter, which states:
A person aggrieved by an unlawful search and
seizure of property or by the deprivation of
property may move for the property’s return. The
motion must be filed in the district where the
property was seized. The court must receive
evidence on any factual issue necessary to decide
the motion. If it grants the motion, the court
must return the property to the movant, but may
impose reasonable conditions to protect access to
the property and its use in later proceedings.
The proof required to be demonstrated by a movant who
seeks return of property turns upon when the motion is filed:
“A person aggrieved . . . by the deprivation
of property may move for the property’s return.”
Fed. R. Crim. P. 41(g). The burden of proof on a
Rule 41(g) motion depends on when the defendant
files the motion. “When a motion for return of
property is made before an indictment is filed
(but a criminal investigation is pending), the
movant bears the burden of proving both that the
[property’s] seizure was illegal and that he or
she is entitled to lawful possession of the
property.” United States v. Martinson, 809 F.2d
1364, 1369 (9th Cir. 1987) (citations omitted).
But that burden of proof changes when “the
property in question is no longer needed for
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evidentiary purposes, either because trial is
complete, the defendant has pleaded guilty, or
. . . the government has abandoned its
investigation.” Id. Then, the burden of proof
shifts and the defendant “is presumed to have a
right to [the property’s] return, and the
government has the burden of demonstrating that
it has a legitimate reason to retain the
property.” Id.; see also United States v.
Kriesel, 720 F.3d 1137, 1144 (9th Cir. 2013)
(explaining that a “defendant’s Rule 41(g) motion
should presumptively be granted if the government
no longer needs the property for evidence.”
(internal quotation marks and citation omitted)).
The government can rebut the presumption
that property ought to be returned by proving a
“legitimate reason” for retaining the property
that is “reasonable[] under all of the
circumstances.” Kriesel, 720 F.3d at 1145; see
also United States v. Kaczynski, 416 F.3d 971,
974 (9th Cir. 2005) (“[T]he government has the
burden of showing that it has a legitimate reason
to retain the property.” (quotation marks
omitted)); Ramsden v. United States, 2 F.3d 322,
326 (9th Cir. 1993) (explaining that
“reasonableness under all of the circumstances
must be the test when a person seeks to obtain
the return of property.” (internal quotation
marks and citation omitted)). The Advisory
Committee’s Note to Rule 41, to which we give
“weight in interpreting the Federal Rules of
Criminal Procedure,” United States v. Bainbridge,
746 F.3d 943, 947 (9th Cir. 2014), confirms the
“reasonableness” standard applies to the return
of computer files on electronic storage devices,
see Fed. R. Crim. P. 41, Advisory Committee’s
Note to 2009 Amendment (“Rule 41(g) . . .
provides a process for the ‘person aggrieved’ to
seek an order from the court for a return of the
property, including storage media or
electronically stored information, under
reasonable circumstances.”). The simplest way
for the government to carry its burden is to
prove “the property . . . is contraband or
subject to forfeiture.” Martinson, 809 F.2d at
1369; see also United States v. Fitzen, 80 F.3d
6
387, 389 (9th Cir. 1996) (“It is well-settled
that the federal government may defeat a
Rule [41(g)] motion by demonstrating that the
property is subject to federal forfeiture.”). To
that end, district courts “must receive evidence
on any factual issue necessary to decide the
motion.” Fed. R. Crim. P. 41(g). The government
can therefore carry its burden by submitting
evidence that demonstrates the property is
contraband or the property falls within the
court’s forfeiture order. See, e.g., [United
States v.] Harrell, 530 F.3d [1051,] 1056–57
[(9th Cir. 2008)]. But showing the property is
contraband or forfeit is not the only way the
government can justify retaining the property;
the government can otherwise retain property if
it can show a “legitimate reason” for doing so.
See, e.g., Kriesel, 720 F.3d at 1145–47 (holding
that the government’s retention of the
defendant’s blood sample was “reasonable under
the circumstances” because the government needed
the sample to ensure the accuracy of future DNA
identifications).
United States v. Gladding, 775 F.3d 1149, 1152–53 (9th Cir.
2014) (some alterations in Gladding).
Here, PacMar filed its Rule 41(g) motion after Kao
pleaded guilty to the charges that serve the basis for his
arrest and the seizure of the cellular telephone. A presumption
thus existed that the cellular telephone should be returned
unless there was a “legitimate reason” for the Government to
retain it that was “reasonable”. The Government did not object
to returning a copy of the data extracted from the cellular
telephone and represented that the cellular telephone
“constitutes and contains evidence in [both the 2021 Indictment
and the 2023 Indictment cases].” [Government’s Response to
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Motion for Return of Property Pursuant to Rule 41(g), filed
1/26/23 (dkt. no. 84), at 2.] It requested that the return
should be limited to a copy of the data extracted. See id. at
3.
Under the circumstances of this matter, the Court
finds that PacMar is a “person aggrieved” “by the deprivation of
property” for purposes of a Rule 41(g) motion and, because Kao
has pleaded guilty, PacMar is presumed to have a right to the
cellular telephone’s return. The burden, then, shifts to the
Government to demonstrate that it has a legitimate reason to
retain the property. Because the Government has demonstrated
that it needs the cellular telephone (or more correctly, the
contents of the cellular telephone, which is the data), it has
partially rebutted the presumption of return. Rule 41(g)
provides, in relevant part, that in granting the Rule 41(g)
motion, the property must be returned but the Court “may impose
reasonable conditions to protect access to the property and its
use in later proceedings.” Fed. R. Crim. P. 41(g).
The Court further finds that a reasonable condition is
that the return of property should be limited to a copy of the
cellular telephone’s contents; i.e., the data, and that the
cellular telephone itself may continue to be retained by the
Government until Kao’s sentencing has been completed for those
criminal charges covered by the 2021 Indictment, and the
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completion of the criminal charges covered by the 2023
Indictment, when the Government no longer has any evidentiary
need for the property in question.
Kao argues that he has a Fifth Amendment privilege
that prevents return of the property in question. He has
pleaded guilty to Counts 1 through 8 of the 2021 Indictment. He
has waived his right to self-incrimination only as to the crimes
that he admitted. United States v. Pierce, 561 F.2d 735, 738
(9th Cir. 1977) (“The defendant retains his privilege as to
crimes for which he may still be liable.” (citations omitted)).
It is undisputed that the cellular telephone was seized when Kao
was arrested in relation to the 2021 Indictment, although the
Government has vaguely represented that the data taken from the
cellular telephone may also pertain to criminal charges
contained in the 2023 Indictment.
First, Kao fails to explain why the contents of the
cellular telephone are protected by his Fifth Amendment right
against self-incrimination in the 2023 Indictment or some other
crime charged against him. If it is because the seizure and
search were illegal as to one or more of these offenses, then
the proper course of action is a motion to suppress.
Second, certain acts, while incriminating, are not
within the privilege against self-incrimination. See, e.g., Doe
v. United States, 487 U.S. 201, 210 (1988) (noting that a
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suspect may be compelled to provide blood sample or voice
exemplar). However, even if the seizure and search of the
cellular telephone was permissible, the self-incrimination
privilege protects verbal and written communications as well as
acts that imply assertions of fact, if testimonial. See id. at
219. “The difficult question whether a compelled communication
is testimonial for purposes of applying the Fifth Amendment
often depends on the facts and circumstance of the particular
case.” Id. at 214-15 (citation omitted). The Court finds that
Kao has not demonstrated facts as to which parts of the data
contained on the cellular telephone are testimonial and thus
protected by the privilege.
Third, Kao argues that his right to privacy protects
the data contained on the cellular telephone from being
disclosed.
[A] criminal defendant may invoke the protections
of the Fourth Amendment only if he can show that
he had a legitimate expectation of privacy in the
place searched or the item seized. Smith v.
Maryland, 442 U.S. 735, 740, 99 S. Ct. 2577, 61
L. Ed.2d 220 (1979). This expectation is
established where the claimant can show: (1) a
subjective expectation of privacy; and (2) an
objectively reasonable expectation of privacy.
See id. (citing Katz [v. United States], 389 U.S.
[347,] 351, 361, 88 S. Ct. 507[, 19 L. Ed. 2d 576
(1967)]); United States v. Shryock, 342 F.3d 948,
978 (9th Cir. 2003). It is [the defendant’s]
burden to prove both elements. United States v.
Caymen, 404 F.3d 1196, 1199 (9th Cir. 2005)
(citation omitted).
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United States v. Ziegler, 474 F.3d 1184, 1189 (9th Cir. 2007)
(emphasis in Ziegler). Kao contends that he had a subjective
expectation of privacy as to the content he created or kept on
the cellular telephone’s data. Pertinent to the second element,
he must demonstrate whether it was objectively reasonable to
expect privacy on the company-owned cellular telephone; whether
the cellular telephone’s data was password protected; and
whether he gave valid consent to the Government to search the
cellular telephone and obtain the data. Kao has the burden of
proving that he had an objectively reasonable expectation of
privacy, but he provides no evidence.
Finally, Kao contends that the magistrate judge should
have ordered that Kao inspect the data for personal information
before it is produced and should have required a basic inventory
of the files. If the data was obtained from the cellular
telephone taken from Kao, then presumably he could or did obtain
a copy of it in discovery. If not, then a motion to compel is
the proper vehicle. Kao contents that “a special master should
be appointed at PacMar’s cost to review and segregate the
data[]” obtained from the cellular telephone. [Appeal at 19. ]
Kao, however, provides no legal authority for this proposition.
The Court thus denies the request.
Ultimately, although the 2/15 Order does not provide
an analysis of the law and facts it relied upon, the Government
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has demonstrated the requisite showing to keep the cellular
telephone and produced data. Based on the aforementioned
analysis, the Court cannot conclude that the magistrate judge
was clearly erroneous in granting PacMar’s motion. The privacy
right arguments raised by Kao are more appropriate for
consideration in the civil lawsuits filed against Kao in the
context of a motion for protective order. Therefore, the
Government is directed to provide a copy of the data extracted
from the cellular telephone to PacMar by May 1, 2023.
Accordingly, the Appeal is denied.
CONCLUSION
On the basis of the foregoing, Kao’s Objections to and
Appeal from Dispositive Order [Document 92] of Magistrate Judge
filed March 1, 2023, is HEREBY DENIED. The Government is
DIRECTED to provide a copy of the data extracted from the
cellular telephone to PacMar by May 1, 2023.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, April 14, 2023.
UNITED STATES OF AMERICA VS. MARTIN KAO; CR 21-00061 LEK; ORDER
DENYING DEFENDANT/INTEREST PARTY MARTIN KAO’S OBJECTIONS TO AND
APPEAL FROM DISPOSITIVE ORDER [DOCUMENT 92] OF MAGISTRATE JUDGE
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