In re Grand Jury Investigation Concerning Solid State Devices, Inc.

Solid State Devices, Inc., and Unisem International (collectively, SSDI) (defendants) sold semiconductors to the Department of Defense (DoD). The contracts required adherence to specific manufacturing standards and extensive testing of the semiconductors for reliability. SSDI had received recognition from many clients for being valuable contributors to projects. However, SSDI was under investigation by the DoD’s internal investigative agency for allegations that SSDI was not complying with the specifications in the contracts by falsely labeling commercial-grade parts as manufactured by SSDI and by falsifying test results, then selling the parts at the prices for highly reliable parts. A DoD agent applied for a warrant based on an affidavit that included information from employees, clients, and government experts. The affidavit contained evidence of routine fraudulent activities. The affidavit included sensitive information and thus was filed under seal. The search warrant was granted and executed. The warrant covered a wide range of documents and data-storage equipment and did not specify what laws SSDI was alleged to have violated. Because the affidavit was filed under seal, no one at SSDI read it. The agents seized computers, storage devices, and over 2,000 drawers and boxes of business-record files. SSDI posited that almost all the materials covering five years of contracts were seized. After approximately 10 months, SSDI filed a petition for their property to be returned pursuant to Federal Rule of Criminal Procedure 41(e) (Rule 41(e)) because the search was not legal. (This rule is now under 41(g).) The government (plaintiff) agreed that the warrant was broad but argued that the affidavit showed that SSDI was so pervaded by fraud that probable cause existed to justify the seizure of almost all documents. The district court denied SSDI’s request, and SSDI appealed.