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Jeff German

Federal judge declares FBI ruse violated gambler's privacy rights

22 April 2015

A federal judge ruled Friday that FBI agents violated a wealthy Malaysian businessman’s privacy rights when they entered his Caesars Palace villa posing as repairmen to secretly gather evidence before conducting a raid in an international sports betting investigation.

U.S. District Judge Andrew Gordon also upheld a federal magistrate judge’s recommendation to toss out evidence in the high-profile case because of misrepresentations and omissions FBI agents made in a search warrant affidavit seeking permission to raid the multimillion-dollar betting operation last July.

The businessman, Paul Phua, is facing illegal gambling charges stemming from the raid.

“It’s a great day for American citizens and Mr. Phua in that the rights of privacy and freedom were upheld by the court,” said David Chesnoff, one of Phua’s lawyers.

Chesnoff and fellow defense attorneys Thomas Goldstein and Richard Schonfeld had argued that the ruse was unconstitutional. Gordon agreed in his 22-page decision on Friday.

Gordon said the unprecedented ruse took away Phua’s Fourth Amendment rights to be free from “unreasonable” searches and seizures, and the judge barred prosecutors from using any evidence agents obtained as a result of it.

“This case tests the boundaries of how far the government can go when creating a subterfuge to access a suspect’s premises,” Gordon wrote. “Here the government disrupted the Internet service to the defendant’s hotel room in order to generate a repair call. Government agents then posed as repairmen to gain access to the defendant’s room and conduct a surreptitious search for evidence of an illegal sports betting operation.

“By creating the need for a third party to enter the defendant’s premises and then posing as repairmen to gain entry, the government violated the defendant’s Fourth Amendment rights.”

Nevada U.S. attorney Daniel Bogden declined to comment on what impact Gordon’s ruling would have on the case against Phua. Bogden said he has not had a chance to read the decision.

Prosecutors have previously said in court that they would have a tough time proving the charges without key evidence FBI and state gaming agents seized in the July 9 Caesars Palace raid.

Phua, 50, a Strip high roller worth hundreds of millions of dollars, was among eight defendants from Malaysia and China charged in the high-tech betting scheme alleged to have accepted illegal wagers on last year’s World Cup in Brazil.

Six defendants, including Phua’s son Darren, pleaded guilty and were each fined and sentenced to five years of probation with the condition they stay out of the United States during that period. The case against a seventh defendant was dismissed.

In court documents, FBI agents and prosecutors tied Phua to an Asian organized crime syndicate, but his lawyers strongly denied the allegations and attacked the government for providing what they called flimsy evidence of the connections.

The betting case attracted national and inter­national attention because of the ruse and Phua’s prominence in the worldwide poker community. Professional poker champion Phil Ivey helped put up his bail.

In February, U.S. Magistrate Judge Peggy Leen found that “false and misleading statements” were made by FBI agents in the sworn affidavit seeking permission to search the Caesars Palace villas. Leen concluded the affidavit was “fatally flawed” and lacked probable cause to support the search.

Federal prosecutors asked Gordon to reject Leen’s findings, arguing that agents presented plenty of evidence in the affidavit to show probable cause that Phua was engaged in criminal activity.

In his decision Friday, Gordon backed Leen and found fault with the affidavit.

Gordon, however, disagreed with Leen’s findings that the ruse was constitutional.

He said FBI agents misled Phua into thinking he had to give up his privacy rights when they clandestinely gathered evidence at his villa July 5 before they obtained a formal search warrant.

Phua, who is free on his own recognizance, is to stand trial before Gordon on June 1.