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SAN FRANCISCO — You might want to watch what you say on your way in
and out of court.

According to court papers filed Friday, federal agents placed secret
recording devices in at least three locations around the entrance to
the San Mateo County courthouse in Redwood City without first getting
judicial approval.

The courthouse bugs were used in 2009 and 2010 to investigate bid-rigging
at public foreclosure auctions. Their existence surfaced in a motion
from defense lawyers for a group of five real estate investors accused
of colluding to deflate prices at the auctions, which were held on the
courthouse steps.

The defense lawyers, led by Latham & Watkins partners Daniel Wall and
Ashley Bauer, are asking U.S. District Judge Charles Breyer to suppress
more than 200 hours of recorded conversations and all evidence gained
from them. They maintain that their clients had a reasonable expectation
of privacy when they gathered to speak in hushed voices away from other
auction participants. "Imagine, as a judge, if you find out that the
stairs that you walk up and down all the time are bugged," said Doron
Weinberg, one of the defense lawyers on the case. "We believe that Judge
Breyer will take the issue seriously and we have confidence that he'll
make a wise decision."

The San Mateo County case is part of a sweeping antitrust sting by federal
prosecutors in the Northern District of California targeting real estate
investors who allegedly conspired to manipulate public auctions during
the height of the foreclosure crisis. Prosecutors have secured more than
50 guilty pleas in similar cases springing from auctions in Alameda,
Contra Costa, San Francisco, and San Mateo counties.

According to Weinberg, Louis Feuchtbaum at Sideman & Bancroft figured
out that the recordings were not made by federal agents or informants
wearing body microphones—something that the defense contends would have
been allowable. "Lou began to realize that these were not consensual
overhearings," Weinberg said. "They were somehow being recorded by an
outside force."

The defense motion claims that beginning in December 2009 government
agents planted microphones in three locations near the entrance of
the courthouse at 401 Marshall Street in Redwood City: inside a metal
sprinkler box attached to the wall, in a large planter box, and in
vehicles parked on the street. The hidden microphones were activated at
least 31 times through September 2010, according to the filing.

The only authorization came from attorneys working for the FBI and
Antitrust Division of the Department Justice, the motion states.

"The government apparently decided that it could record all conversations
that occurred near the courthouse without any concern that it would
capture communications protected by the Fourth Amendment and Title III,"
the defense lawyers wrote, pointing out that the courthouse steps are
regularly the site of privileged conversations between lawyers and their
clients. "What the government did here is not unlawful only because it
occurred outside a courthouse, but that fact makes it all the worse,"
they wrote.

The defense team includes Matthew Jacobs of Vinson & Elkins and Jeffrey
Bornstein of Rosen Bien Galvan & Grunfeld, in addition to Weinberg,
Feuchtbaum and the Latham lawyers.

A spokesperson for the Justice Department declined to comment.

Sideman's Feuchtbaum said that the courthouse recordings have significance
that extends beyond the San Mateo foreclosure case.

"If this is allowed to stand," he said, "I and every other lawyer who
knows about this is on notice that they can never have an expectation
of privacy on the courthouse steps since the government has assumed for
itself the right to plant hidden microphones there."