United States v. Droganes (893 F. Supp. 2d 855, 2012)

MEMORANDUM OPINION & ORDER

DAVID L. BUNNING, District Judge.

This matter is before the Court on the Magistrate Judge’s Report and Recommendation (“R & R”) (Doc. # 186) which addressed three pending motions in this matter: (1) Defendant’s Objections to the United States’ Preliminary Judgment of Forfeiture (Doc. # 103); (2) Defendant’s Motion for Sanctions (Doc. # 119); and (3) the United States’ Motion for Destruction of Property (Doc. # 142). The Magistrate Judge recommends that the Court sustain in part Defendant’s Objections to the United States Preliminary Judgment as being overly broad, grant in part Defendant’s Motion for Sanctions, and deny as moot the United States’ Motion for Destruction of Property. Both parties have objected to the R & R (Docs. # 192, 193), and the parties have filed supplemental memoranda on the Magistrate Judge’s recommendation that sanctions be imposed on the government. (Docs. # 196,197).

The Court held oral argument on August 3, 2012 to consider the parties’ objections to the R & R. Assistant United States Attorneys Candace Hill and Daniel Kinnicut appeared on behalf of the United States. Attorneys Gary Sergent, Bruce McClure, and Kathleen Brinkman appeared on behalf of Defendant, who was present at the hearing. The proceedings were recorded by Official Court Reporter Lisa Wiesman. At the close of the hearing, the Court took the parties objections to the R & R and the pending motions under advisement.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. The Seizure

Defendant Sam Droganes is the sole owner of Premium Fireworks, Inc., located in Covington, Kentucky. Droganes is in the business of selling consumer fireworks, also known as 1.4G fireworks. Premium Fireworks has never been licensed to sell display fireworks, also known as 1.3G fireworks.

In June 2007, the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) and the Consumer Products Safety Commission (“CPSC”) began investigating Premium Fireworks for unlawfully selling 1.3G fireworks. On June 27, 2007, an undercover CPSC agent purchased thousands of dollars worth of fireworks from Defendant, which consisted of thirteen different types of fireworks. Although marked as 1.4G (consumer) fireworks, all were ultimately found not to be 1.4G fireworks: twelve were 1.3G (display) fireworks and one was a prohibited explosive device. (Doc. # 181; Gov’t Ex. 2).

On July 2-3, 2007, ATF obtained and executed search warrants on the building where the Premium Fireworks store was located, two warehouses, Defendant’s residence, and a 1997 Chevrolet box truck. Officer Fred Bradford, an ATF explosives enforcement officer, testified that he was involved in the execution of the search warrants in this matter and that ATF seized essentially all of Defendant’s inventory.

In July 2007, ATF learned from U.S. Customs personnel that Defendant was receiving multiple shipments of fireworks from outside the country. Based on this information and a viewing of these fireworks, ATF obtained seizure warrants for seven conex shipping containers that were being held by U.S. Customs. Officer Bradford was involved in the search of the conex containers and testified to a dangerous condition he observed involving flash powder in one of the conex containers. Agent Chard and Officer Bradford also testified that they observed moisture from condensation in some of the containers. Ultimately, ATF seized the fireworks in these conex containers, as well as the conex containers themselves.

In August 2007, ATF served seizure warrants for three additional conex containers containing fireworks. These containers were located at the Norfolk rail yard in Cincinnati, Ohio, and were destined for Premium Fireworks, Inc. (Doc. # 66-6). These fireworks and conex containers were also seized.

All of the seized fireworks, some 44 tractor trailer loads, were transported to Heritage Storage in Alda, Nebraska.

B. Testing and Segregation of Fireworks

John Frederick, Heritage Storage’s Chief of Security and Storage Manager, testified that in July 2007, he traveled to Kentucky to assist in preparing the fireworks for shipment to Heritage Storage. As part of the process, Frederick inventoried all of the pallets being shipped, including the number of boxes on each pallet and its weight.

On August 22, 2007, Agent Chard sent two samples of the Red Coconut Rockets, removed from the conex containers at the rail yard, to the ATF laboratory for testing. On December 12, 2007, Agent Chard sent a sample of each of the thirteen fireworks involved in the undercover purchase to the ATF laboratory for an analysis of whether they were 1.3G or 1.4G fireworks. The ATF Explosives Technology Branch disassembled and weighed the samples and concluded that all thirteen samples exceeded the maximum weight permitted to be classified as a 1.4G firework. (Doc. # 181; Gov’t Ex. 2). No classification was made on the Red Coconut Rockets.

On August 12, 2008, ATF selected 450 fireworks to be tested. Frederick inventoried the samples and then had them transported from Heritage Storage to Safety Consulting Engineers (“SCE”) for testing. Karl James Dahn, an engineer for SCE who has extensive experience with pyrotechnics and explosive matters, testified that he conducted the classification inspection on each of the 450 fireworks and then authored an October 26, 2008 report. (Doc. # 181; Gov’t Ex. 3). Dahn used the American Pyrotechnic Association (“APA”) and National Fire Protection Association’s (“NFPA”) guidelines in classifying the fireworks and not the more stringent standards found in the Code of Federal Regulations (“CFR”).

Dahn testified that he prepared a data sheet on each firework inspected, which sheet contains the measurements and weight of each firework. He explained that to determine the total weight of a firework containing multiple shots, he would measure and weigh one shot and multiply that weight by the number of shots contained in the firework. For example, in inspecting the twenty-shot cake recorded on Government’s Exhibit 17 (Doc. # 181), Dahn measured and weighed one of the twenty shots making up the cake. He did not weigh each of the twenty tubes separately. To get the total weight of the firework, he added the calculated pyrotechnic weight to the weight of the propelling charge. After testing all 450 fireworks, he concluded that 187 were non-consumer fireworks under the APA standards. (See Doc. # 181; Gov’t Ex. 3, table 4). On October 26, 2008, SCE submitted its report to ATF on the first 450 samples. (Doc. # 114-1). On November 6, 2008, Frederick went back to SCE to retrieve the samples, inventoried the items and shipped them back to Heritage.

In December 2008, ATF began the task of sorting the fireworks stored at Heritage Storage. Frederick testified that by early 2009, all of the fireworks were separated and classified as being either red (display), green (consumer), or orange (uncertain of classification). The fireworks were placed into bunkers, identified as red or green, based on their classification. (Doc. # 181; Gov’t Exs. 11,12). As part of this process, ATF unloaded the conex containers. Officer Bradford was involved in the unloading of the conex containers and testified that the weather conditions were extreme, causing the moisture in the conex containers to freeze. As a result, boxes were damaged and some were frozen together. (Doc. # 181; Gov’t Exs. 5-8). The agents moved the fireworks from the conex containers to the bunkers and returned the conex containers to their owner. Ultimately there were twenty-nine bunkers of fireworks: seventeen bunkers contained red fireworks, and twelve bunkers contained the green and orange classified fireworks. (Doc. # 181; Def. Ex. QQ).

After ATF completed its work at Heritage in January 2009, all of the water-damaged boxes were inventoried and moved to one bunker: Bunker Row 1-7. Frederick testified there were fourteen pallets, a total of 204 boxes, of water-damaged items. Frederick also testified that all of the water-damaged fireworks were classified as red, i.e., they were display fireworks. Although Officer Bradford testified to several boxes being damaged by rodent infestation, Frederick was not aware of any rodent damage to the actual fireworks. In a letter regarding the January 2009 manipulation, Heritage’s vice president reported that there were seventy-six boxes of fireworks that had either packaging or product damage caused by field mice. (Doc. # 181; Def. Ex. LL, at 3).

In or about January 2009, Officer Bradford also conducted testing on approximately seventy fireworks. As part of his inspection, he disassembled each firework, weighed the chemical composition of one shot and multiplied it by the number of shots in the firework to obtain a total weight, determined whether the sample contained any prohibited components, and then analyzed whether the firework qualified as a consumer or display grade firework under the APA standards. This process culminated in a report dated March 17, 2009. (Doc. # 181; Gov’t Ex. 10). Thirty of the seventy fireworks tested were 1.4G fireworks and forty were found to be display fireworks. Officer Bradford testified that he gave Defendant the benefit of the doubt in determining the weight of the chemical composition of a given firework. He testified that in instances where the explosive material was mixed with nonexplosive materials, he cut the weight in half since he could not separate the materials.

In February 2009, Frederick took a second batch of 521 fireworks to SCE for a classification inspection. While the inspection process for the second batch was the same used in the first batch, the second report by SCE contained more detail. Dahn testified that for multi-shot fireworks, he again multiplied the weight calculation he obtained for one shot by the number of shots in the firework and added it to the weight of the propelling charge to obtain the total weight of the firework. He issued a draft report on March 18, 2009, which report evidences that, based upon the APA standards, 340 of the 521 firework samples inspected during this testing were display fireworks. (Doe. #181; Gov’t Ex. 4).

On March 11, 2009, the Government notified Defendant that the CFR standards would be applied in this criminal prosecution, not the less stringent APA standards used in Dahn’s and Bradford’s reports. (See Doc. # 119-1). Also on March 11, 2009, the United States sent Defendant “a list of items that have been determined to be 1.4G (consumer) fireworks,” which list was being “provided pursuant to the Court’s February 19, 2009 order.” (Doc. # 119-1). Sometime after receiving Dahn’s March 13, 2009, report (Doc. # 181; Gov’t Ex. 4), Agent Chard and Officer Bradford used the data sheets from testing to reclassify the fireworks under the CFR standards.

From August 18, 2009 until October 16, 2009, Heritage and ATF personnel worked together to complete a physical inventory of all of the fireworks. (Doc. # 181; Gov’t Exs. 11, 12). During this process the fireworks were counted, weighed and each type was photographed. (Doc. # 181; Def. Ex. SS). According to Agent Chard’s testimony, utilizing the final physical inventory lists and the CFR standards, there were approximately 862 different types of fireworks that were classified as 1.3G fireworks (Doc. # 181; Gov’t Ex. 11) and 366 types of fireworks that were classified as either green or orange. (Doc. # 181; Gov’t Ex. 12). Fireworks classified as 1.3G fireworks are listed on what has come to be known as the “Red List,” a list produced by the government at the evidentiary hearing (Doc. # 181, Gov’t Ex. 11). Similarly, fireworks classified as 1.4G fireworks are listed on what has come to be known as the “Green List,” and unclassified fireworks are listed on the “Orange List.” (Doc. # 181, Gov’t Ex. 12).

C. The Criminal Case

On July 10, 2008, Droganes was indicted in a six-count indictment charging him with engaging in the business of importing, manufacturing, transporting and distributing explosive material without an ATF license and forfeiture. (Doc. # 1). On October 7, 2008, Droganes filed a Motion for Return of Property pursuant to Federal Rule Criminal Procedure 41(g), seeking the return of the lawful 1.4G fireworks. (Doc. # 17). After the motion was fully briefed and arguments were heard, Magistrate Judge Wehrman issued a Report and Recommendation recommending that the undersigned order the United States to complete its testing and provide Defendant with a list of 1.4G fireworks, along with a timetable for their return, within thirty days. (Doc. #36). The District Judge adopted the R & R, but provided the United States until March 11, 2009, to complete its testing, including segregating the 1.3G and 1.4G fireworks, and provide an inventory list of the legal 1.4G fireworks and a timetable for their return. (Doc. #44).

As previously discussed herein, pursuant to the District Court’s Order, an AUSA on March 11, 2009, sent a letter to defense counsel containing a list compiled by ATF of the purported 1.4G fireworks being stored at Heritage. (Doc. # 119-1). And as previously noted, that letter also informed that ATF believed that all of the fireworks stored at Heritage Storage were unfit to be transported back into interstate commerce, but that ATF would agree to compensate Defendant the wholesale price for the legal fireworks. (Id.).

On July 31, 2009, Defendant pled guilty to Count Five of the Superseding Indictment, charging him with distributing explosives without a license. He also agreed to forfeit the “items listed in Count Six of the Superseding Indictment that have been determined by ATF to be display fireworks.” (Doc. # 105, at 4). On March 23, 2010, the United States gave notice of the filing of its Preliminary Judgment of Forfeiture, to which Defendant filed Objections. (Does. # 95, 103). On April 7, 2010, Defendant was sentenced to a split sentence of four months of incarceration to be followed by four months of home confinement. (Doc. # 107).

After Sentencing, the Court addressed forfeiture with counsel and instructed Defendant to file supplemental objections indicating why certain fireworks on the Government’s exhibit to the Preliminary Judgment of Forfeiture were not subject to forfeiture. The Government was given ten days to respond to the supplemental objections. (Doc. # 116). The parties filings were made on April 27, 2010, and May 3, 2010, respectively. (Docs. # 112, 114).

On January 4, 2010, the ATF notified Defendant by letter that it would not compensate him for the consumer fireworks. (Doc. # 119-6). The ATF justified its refusal by claiming that the “detention of goods” exception to the government’s waiver of sovereign immunity in the Federal Torts Claims Act “precludes any claim based on the failure of law enforcement to return detained property or arising out of negligent handling or storage of property seized not solely for forfeiture purposes.” After that letter, there were no further discussions about compensating Defendant for the 1.4G fireworks. Consequently, on July 8, 2010, Defendant filed a Motion for Sanctions for the Government’s failure to timely return or otherwise provide compensation for the consumer fireworks.

On January 14, 2011, the Government filed a Motion for Destruction of Property, arguing the fireworks had deteriorated to such a degree that they could not be returned to Defendant. (Doe. # 142). In addition, the Government argued that the cost of storing the fireworks far exceeded their value and presented affidavits in support of their argument. (Docs. # 142-1, 142-3, 142-6). The pending objections/motions were referred to the Magistrate Judge for Report and Recommendation.

Magistrate Judge Smith rendered her R & R on May 18, 2012, 2012 WL 3610219., She concluded that Defendant’s objection to the proposed Preliminary Judgment of Forfeiture should be sustained in part as being overly broad. She found that the government proved by a preponderance of the evidence that all fireworks on the Red List (Doc. # 181; Gov’t Ex. 11) are 1.3G fireworks subject to forfeiture. Therefore, she recommends that the government be ordered to file an amended proposed Preliminary Judgment of Forfeiture that identifies the fireworks subject to forfeiture as those identified on the Red List. She also recommends that the undersigned order the government to return all fireworks on the Green and Orange lists.

Additionally, Magistrate Judge Smith recommends the Court impose sanctions against the government under its inherent power. The Magistrate Judge concluded that the government’s noncompliance with this Court’s Order to complete testing, provide Defendant with a list of 1.4G fireworks and a timetable for their return not later than March 11, 2009 was done in bad faith. She also concluded that the government’s representations that the fireworks were damaged, and the government’s continued refusal to return legal 1.4G fireworks were done in bad faith.

Defendant and the government have each objected to the R & R (Docs. # 192, 193). Defendant objects to the Magistrate Judge’s conclusion that all fireworks on the Red List are subject to forfeiture, and argues that he should be given additional time to independently .test those fireworks the government has determined to be 1.3G fireworks. The government agrees with the Magistrate Judge’s conclusions concerning the fireworks subject to forfeiture, but objects to the Magistrate Judge’s recommendation that sanctions be imposed on the government. Each objection will be addressed in turn.

II. ANALYSIS

A. Defendant’s Objection to the United States’ proposed Preliminary Judgment of Forfeiture (Doc. # 103)

Defendant originally objected to the language in the United States’ proposed Preliminary Judgment of Forfeiture as “void for vagueness, unenforceable and [because it] usurps the judicial authority of the court in this case.” (Doc. # 103). The proposed Preliminary Judgment of Forfeiture stated that “[a]ll fireworks listed in Count 6 of the Superseding Indictment that ATF has deemed to be display fireworks” are “hereby condemned and forfeited to the United States of America pursuant to Title 18, United States Code, Section 844(c)(1).” (Doc. # 95-1). The United States presumably proposed this language because it mirrored the forfeiture provision Defendant agreed to in his plea agreement, which stated “Defendant will forfeit to the United States any and all interest in the items listed in Count 6 of the Superseding Indictment that have been determined by ATF to be display fireworks.... ” (Doc. # 105).

In her R & R, Magistrate Judge Smith concluded that the language of the proposed Preliminary Judgment of Forfeiture was overly broad and, thus, recommends that Defendant’s objection be sustained in part. The Magistrate Judge also concluded that “[t]he evidence presented at the evidentiary hearing ... supports a finding that the Government has established by a preponderance of the evidence that the fireworks contained on the red list (Doc. # 181, Ex. 11) are 1.3G fireworks and are subject to forfeiture under 18 U.S.C. § 844(c)(1) as explosive materials intended to be used in violation of the provisions of § 842.” (Doc. # 186, p. 16). Furthermore, the Magistrate Judge found that the fireworks on the Green and Orange Lists (Doc. # 181, Gov’t Ex. 12) are 1.4G fireworks and not subject to forfeiture. Therefore, the Magistrate Judge recommends that the Government be ordered to tender a new proposed Preliminary Judgment of Forfeiture that specifically identifies the fireworks on the Red List (Doc. # 181, Gov’t Ex. 11) as being subject to forfeiture. She also recommends that the government be ordered to return all fireworks on the Green and Orange Lists, at the government’s expense.

1. Those items recently determined to be 1.3G fireworks by ATF (Doc. # 199-3) are subject to forfeiture

Despite the recommendation that all fireworks on the Orange List be returned, the ATF conducted further testing on those fireworks at the direction of the Assistant United States Attorney. Neither the Court nor Defendant were aware of this additional testing until the August 3, 2012 oral argument. After the oral argument, the government submitted a letter from Carl Vasilko, the Director of the National Center for Explosives Training and Research, explaining that ATF tested each of the fireworks on the Orange List “using the same protocol as they had during their examination of other items related to this investigation.” (Doc. # 199-1). Based on the additional testing, the ATF produced a new list classifying each of the fireworks on the original Orange List as either 1.3G or 1.4G fireworks. (Doc. # 199-2) (hereinafter referred to as the “amended Orange List”). The ATF found that 44 categories of fireworks on the original Orange List are 1.3G fireworks and 13 categories of fireworks are 1.4G fireworks. (See Doc. # 199-1). Additionally, the ATF concluded that 27 items on the original Orange List were destroyed during previous testing and cannot be returned. {See id.).

Although Defendant has not had an opportunity to challenge the ATF’s most recent testing, the Court finds by a preponderance of the evidence that the fireworks recently identified as 1.3G fireworks are, in fact, 1.3G fireworks. The ATF tested each of those fireworks using the same protocol it used to test other fireworks in this case. Despite Defendant’s general concerns about the ATF’s testing methods, the Magistrate Judge concluded that these protocols produced reliable results. As explained in more detail below, the undersigned agrees with the Magistrate Judge’s conclusion. Therefore, any fireworks identified as 1.3G fireworks on the recently amended Orange List (Doc. # 199-3) are subject to forfeiture.

Additionally, the 27 items that were destroyed during previous testing shall also be forfeited. As the ATF explains, each of these items consisted of only one single piece of product that had previously been examined by a private contractor. That contractor was unable to definitively classify those 27 items as either 1.3G or 1.4G fireworks. However, after the contractor tested the items, the items were destroyed and, therefore, can neither be returned nor forfeited.

2. Defendant’s Objections to Magistrate Judge Smith’s Recommended Adjudication of the objections to the United States’ Proposed Preliminary Judgment of Forfeiture

Defendant now objects to the Magistrate Judge’s recommended adjudication of his objections to the United States’ proposed Preliminary Judgment of Forfeiture. Although Defendant has labeled four separate arguments, he has essentially set forth two arguments for the Court’s consideration. First, Defendant asserts that once the government produces a final Red List identifying all allegedly illegal fireworks, he should be given the opportunity to test fireworks he purchased at public sale that are on that list. Second, Defendant asserts that any 1.3G fireworks included in his personal collection are not subject to forfeiture because they were never intended to be sold or available for sale. Thus, Defendant contends they are not within the scope of the Indictment.

At oral argument, the government contended that each of Defendant’s objections should be precluded by the terms of his plea agreement. In paragraph ten of Defendant’s plea agreement, Defendant agreed to “forfeit to the United States any and all interest in the items listed in Count 6 of the Superseding Indictment that have been determined by ATF to be display [1.3G] fireworks----” (Doc. #105) (emphasis added). Count 6 listed each of the twelve 1.3G fireworks Defendant sold to the undercover agent on June 27, 2007 as well as all other fireworks seized from Defendant. The government argued that Defendant agreed to forfeit all of these fireworks to the extent that they were determined to be 1.3G fireworks by the ATF. The Court agrees for the following reasons.

The Supreme Court has upheld a district court’s Judgment of Forfeiture where the Judgment was consistent with a forfeiture provision within the defendant’s plea agreement. In Libretti, the Supreme Court considered whether a district court’s forfeiture order must be set aside because the court neglected to establish a factual basis for forfeiture of the property covered by the order pursuant to Federal Rule of Criminal Procedure 11(f). Id. at 37, 116 S.Ct. 356. The Court held that Rule 11(f) only required district courts to establish a factual basis for the defendant’s admission of guilt to a substantive criminal offense. Id. Forfeiture, according to the Supreme Court, “is an element of the sentence imposed follomng conviction ... and thus falls outside the scope of Rule 11(f).” Id. at 38-39, 116 S.Ct. 356. As such, a district court may accept a defendant’s agreement to forfeit assets so long as the defendant entered the agreement knowingly and voluntarily. Id. at 42,116 S.Ct. 356.

Pursuant to Libretti the forfeiture provision in Defendant’s plea agreement is enforceable because it was entered knowingly and voluntarily. At Defendant’s re-arraignment, the Court advised Defendant that by pleading guilty to Count 5 of the Superseding Indictment, he would be admitting his guilt to a felony offense. (Doc. # 77, at 7). The Court also ensured that the plea agreement encompassed the entire agreement between Defendant and the government, and that no other promises or assurances had been made to Defendant. (Id. at 9). In addition, Defendant stated that no one had forced or threatened him to enter his guilty plea. (Id.).

After ensuring that Defendant was voluntarily entering a guilty plea, the Court asked the Assistant United States Attorney (“AUSA”) to give a summary of the written plea agreement. (Id.). As part of this oral summary, the AUSA stated that “defendant agrees to forfeit to the United States any and all interest in the items listed in Count 6 of the superseding indictment that have been determined by ATF to be display fireworks, and he agrees to execute any documents necessary for this forfeiture, whether it’s judicial or administrative.” (Id. at 11). At the conclusion of the summary, Defendant verified that the summary was accurate and consistent with his understanding of the plea agreement.

The Court also specifically addressed the forfeiture provision with Defendant during the rearraignment. The Court stated:

Well, Mr. Droganes, if something is determined to have been a display firework, you understand that this plea agreement requires that you forfeit, whether it be judicial or administrative, any interest you have in those items?

That’s a negotiated term of this plea agreement. Do you understand that? (Id. at 12). Defendant responded, “Yes, sir, I do.”

At the conclusion of the rearraignment, the Court found that Defendant was competent and capable of entering an informed plea, and that Defendant was aware of the nature of the charge in Count 5 and the consequences of the plea. (Doc. # 77, at 30). The court also found that Defendant’s plea of guilty to Count 5 was knowing and voluntary, and supported by an independent basis in fact. (Id.) As a result, the Court accepted Defendant’s plea and adjudged Defendant guilty of Count 5. (Id.).

Defendant is now bound by the terms of his plea agreement. See United States v. Lukse, 286 F.3d 906, 909 (6th Cir.2002) (holding that plea agreements are contractual in nature and, thus, enforceable pursuant to traditional principles of contract law). The scope of Defendant’s agreement is a question of fact for this Court to determine. Id. Having reviewed Defendant’s plea agreement, the Court finds that Defendant agreed to be bound by the ATF’s determination on which fireworks are 1.3G. Defendant also agreed to forfeit all fireworks listed in Count 6 of the Superseding Indictment that were determined to be 1.3G fireworks. With this agreement in mind, the Court will turn to each of Defendant’s specific objections.

a. Defendant argues he should now be permitted to test fireworks on the government’s Red List

On objection to the R & R, Defendant contends that he should now be entitled to test those fireworks he purchased at public sale that the government has identified as 1.3G fireworks. However, as explained above, Defendant agreed to forfeit all fireworks that ATF determined to be 1.3G fireworks. As a term of his plea agreement, Defendant negotiated away the right to independently test and confirm the ATF’s findings. Defendant’s agreement aside, Defendant has not set forth a reason that justifies further testing at this juncture.

Assuming, arguendo, that Defendant did not agree to be bound by the ATF’s determination, the Court will address each of the four reasons Defendant’s offers in support of his request to test the 1.3G fireworks. First, Defendant argues that it is illogical to conclude that any of the fireworks he purchased at public sale are 1.3G fireworks. Instead, Defendant suggests that the Court should presume the fireworks are legal for two reasons. First, the fireworks were purchased from a bankruptcy trustee who was selling the inventory of a bankrupt firework distribution business. The owner of that business, David Browning, testified at the evidentiary hearing that he only sold 1.4G fireworks. Second, Defendant argues “there is also a presumption that the trustee had independently verified that the products that he was entrusted to sell at public auction were legal 1.4G fireworks.” (Doc. # 193, at 2).

However, the Magistrate Judge appropriately considered this argument in her R & R, when she stated:

Defendant also argued in his Objections that a significant number of fireworks identified as 1.3G by the Government are 1.4G as evidenced by the fact they were either manufactured by companies that do not manufacture 1.3G fireworks or were purchased from a bankruptcy sale that included only 1.4G fireworks ... This argument that all items labeled as 1.4G and/or that were sold by the bankruptcy court are presumptively legal 1.4G fireworks is unpersuasive and therefore rejected. The Government has presented evidence of laboratory testing supporting its position that the labels were unreliable, as many fireworks were overloaded. The Government also demonstrated that the fireworks were classified as 1.3G were classified as such, despite their labels, only after testing revealed they exceeded the weight permitted to be classified as 1.4G.

(Doc. # 186, at 17).

The testimony at the evidentiary hearing supports the Magistrate Judge’s conclusion that Defendant is not entitled to a presumption that the fireworks purchased at public sale were 1.4G fireworks. Mr. David Browning, the owner of the bankrupt corporation, testified that “[his business] imported and wholesaled consumer 1.4G fireworks.” (Doc. # 190, at 207). He also verified that his inventory was sold to Defendant at a public sale by the bankruptcy trustee. However, aside from stating the he only imported and sold consumer 1.4G fireworks, Mr. Browning offered absolutely no testimony to objectively prove the fireworks in his inventory were actually 1.4G fireworks. Therefore, Mr. Browning’s statements do not entitle Defendant to a presumption that the fireworks he purchased at public sale were 1.4G.

Defendant’s argument that the Court should assume the bankruptcy trustee tested the fireworks before selling them to ensure they were 1.4G is likewise unavailing. Specifically, Defendant contends that “[i]t is illogical to find that the trustee would sell at public auction 1.3G fireworks to Defendant, if only because doing so would be illegal ... [T]he trustee is prohibited from selling any 1.3G fireworks to a person who does not hold a valid federal explosives license.” (Doc. # 192, at 2). It is certainly true that it would be illegal for the trustee to sell 1.3G fireworks to a person who does not hold the appropriate license. However, Defendant has offered no reason why the Court should presume the trustee engaged in lawful behavior. If Defendant wished to rely on this argument, he had the opportunity to call the trustee as a witness during the evidentiary hearing to establish that the trustee tested the fireworks. Without any evidence of record to show the trustee tested the fireworks, Defendant is simply not entitled to the presumption that the trustee only sold 1.4G fireworks.

Defendant also argues he should now be permitted to test the fireworks the Government has deemed 1.3G fireworks because the government experts’ method of testing the fireworks was unreliable and produced inaccurate measurements. According to Defendant, the government’s experts “crudely multiplied the number of tubes by the weight assigned to the one, and only, tube actually tested” and did not weigh each of the tubes separately, which “call[s] into doubt the precision and accuracy of the results.” (Doc. # 192, at 8). However, as explained above, Defendant agreed in his plea agreement to be bound by the ATF’s determination on which fireworks are 1.3G fireworks. Thus, he cannot now challenge the ATF’s determination.

Moreover, Defendant also presented this argument to the Magistrate Judge, who rejected the contention on its merits. In her R & R, the Magistrate Judge detailed the government experts’ testing methodology (See Doc. # 198, p. 4) and then stated:

In addition, although Defendant’s experts testified that analyzing only one shot of a multi-shot cake and multiplying it by the number of shots in a device was an inaccurate method for determining the pyrotechnic weight of a device, they could not point to a single sample where the methodology produced an inaccurate measurement. Nor did any of Defendant’s experts conduct any testing of their own. In addition, Officer Bradford testified that in conducting the testing, he and SCE followed ATF’s accepted protocol. Bradford further testified that he did not observe any dummy cylinder in any of the fireworks he tested.

(Id. at 16-17).

As the Magistrate Judge accurately explained, while Defendant’s expert, Eugene Baker, expressed general doubt on the reliability of the government experts’ methodology, he offered no direct evidence that the methodology produced inaccurate results. For example, on redirect examination, defense counsel attempted to clarify the unreliability of the government experts’ methodology of weighing one tube within a firework and then multiplying that weight by the total number of tubes to arrive at a total weight of the pyrotechnic charge. Defense counsel asked Mr. Baker, “Would all of the powder components in each tube be the same if each tube has a different effect?” (Doc. # 191, at 36). Mr. Baker replied, “[tjhere’s no way to know what the weights were on each individual tube.” (Id.). Although this line of questioning cast doubt on the reliability of the methodology, it simply did not show that the methodology produced inaccurate results. Because the Magistrate Judge adequately and accurately considered this objection in her R & R, the Court finds no reason why Defendant is entitled to additional testing based on this objection.

Defendant offers a third reason why he should now be permitted to test the fireworks the government has classified as 1.3G. According to Defendant, in the interest of financial prudence and expedience, he should only be required to test the fireworks after the government produces a final Red List identifying which fireworks it deems as 1.3G. However, Defendant has had ample opportunity to test the fireworks in this case. Although the government has recently identified forty-four (44) additional types of fireworks as 1.3G fireworks (See Doc. # 199-3), Defendant has known since his sentencing that the government classified over 860 other types of seized fireworks as 1.3G. The government’s “Red List,” identifying approximately 862 types of fireworks as 1.3G, was originally admitted as an exhibit at Defendant’s sentencing on April 7, 2010. (Doc. # 108). The government submitted the same Red List as an exhibit during the three-day evidentiary hearing held on August 29-31, 2011. (Doc. # 181, Ex. 11). In fact, when authenticating the exhibit during the evidentiary hearing, the AUSA stated to the witness, “I’m going to show you what has been ... marked as Government’s Exhibit, for this purpose here, 11. It was previously marked as Government’s Exhibit Number 1 at the sentencing hearing on April 7th of 2010 under document number 108.” (Doc. # 189, at 54). As a result, Defendant knew about approximately 95% of the fireworks the government classified as 1.3G for at least a year before the evidentiary hearing.

If Defendant wanted to test fireworks only after the government identified allegedly 1.3G fireworks, he had the opportunity to conduct that testing before the evidentiary hearing. Instead, Defendant has waited until after the Magistrate Judge conducted a three-day evidentiary hearing and rendered her R & R to argue that he should now be permitted to conduct his own testing. Simply put, Defendant’s argument does not explain why he failed to test the fireworks on the Red List, admitted as an exhibit during his sentencing, long ago. Defendant has had ample opportunity to test the fireworks, and the Court will not allow him to begin testing at this juncture.

Defendant’s third argument merits one final comment. Defendant seems to believe that this matter was referred to the Magistrate Judge to make an initial determination on whether the government could prove by a preponderance of the evidence that the fireworks on the Red List were subject to forfeiture. If the Magistrate Judge concluded the Red List accurately identified illegal fireworks, Defendant seems to suggest he should have an opportunity to refute that finding before the undersigned by presenting additional evidence. Defendant’s understanding of the purpose of referring this matter to the Magistrate Judge, however, is mistaken.

This matter was referred to the Magistrate Judge to make a recommendation on the ultimate adjudication, and not on whether the government met an initial burden of proof that the seized property was subject to criminal forfeiture. Moreover, this is not a burden shifting case. Instead, the government has the burden to prove by a preponderance of the evidence that the seized fireworks are subject to forfeiture. See United States v. Warshak, 631 F.3d 266, 331 (6th Cir.2010); United States v. Jones, 502 F.3d 388, 391 (6th Cir.2007); United States v. Hall, 411 F.3d 651, 654 (6th Cir.2005). If the Defendant wished to challenge that the government had not met its burden, he should have presented contrary evidence at the evidentiary hearing, which he certainly had time to develop. Accordingly, Defendant’s third argument as to why he should now be permitted to test fireworks is not well taken.

Defendant’s fourth and final argument as to why he should now be permitted to test fireworks was not presented to the Magistrate Judge and, thus, not discussed in her R & R. Defendant suggests he is contemplating pursuing a civil action against the bankruptcy trustee for selling 1.3G fireworks under the guise that the fireworks were 1.4G fireworks. Anticipating that litigation, Defendant argues he must be given the opportunity to more stringently test the fireworks he purchased at the public sale in order to develop necessary evidence for that lawsuit. Defendant asserts that if he is denied the opportunity to test the fireworks, or if they are destroyed before that litigation, he may be subject to a spoliation of evidence defense.

The Court, however, is not inclined to require that the fireworks continue to be preserved in anticipation of potential litigation against the bankruptcy trustee. Defendant has cited to no authority for the proposition that a Court must preserve property subject to forfeiture if that property will potentially be admitted as evidence in a yet-to-be-filed civil case. Ultimately, this Court must decide the matters pending in this case, and not forecast issues that might arise in a hypothetical lawsuit. Therefore, the Court will not permit Defendant to conduct additional testing on any 1.3G fireworks purchased at public sale, nor require that they be preserved, in anticipation of future civil litigation.

In the end, the government has proven by a preponderance of the evidence that the fireworks on the Red List (Doc. # 181, Gov’t Ex. 11) and those identified as 1.3G fireworks on the recently amended Orange List (Doc. # 199-3) are, in fact, 1.3G fireworks subject to forfeiture pursuant to 18 U.S.C. § 844(c)(1) and paragraph 10 of Defendant’s plea agreement.

b. Defendant’s Personal Collection

Defendant is also “especially interested in recovering the fireworks that he maintained as his personal collection.” (Doc. # 192, at 10). The Magistrate Judge concluded that Defendant’s personal collection was subject to forfeiture. Although Defendant does not specifically object to the Magistrate Judge’s findings regarding these fireworks, Defendant argues that “none of [the fireworks in his personal collection] were ever intended, or even available for sale; therefore at all times relevant, the disposition of these fireworks is outside the scope of the criminal indictment.” (Id.). By this argument, Defendant contends that the government failed to establish the requisite nexus between his personal collection of fireworks and the offense of conviction in accordance with Federal Rule of Criminal Procedure 32.2(b)(1)(A) and 18 U.S.C. § 844(c)(1), and the Magistrate Judge erred in finding to the contrary.

At oral argument, Defense counsel elaborated on this argument. Counsel suggested that, pursuant to 18 U.S.C. § 844(c)(1), Defendant is only required to criminally forfeit those fireworks he sold to an undercover agent on June 27, 2007. Defendant pled guilty to Count 5 of the Superseding Indictment and agreed that the government could prove beyond a reasonable doubt that he sold “a quantity of fireworks” from his store to an undercover agent on or about June 27, 2007. (Doc. # 105). Defendant also agreed that “subsequent testing confirmed that all but one of the items were 1.3G (display) fireworks,” and that he did not have a license or permit from ATF to distribute display fireworks. {Id.). Combining Defendant’s written objection and his counsel’s argument at oral argument, Defendant apparently argues that his personal collection was not involved in the June 27, 2007 sale and he did not otherwise intend to sale those fireworks. Therefore, Defendant contends the fireworks are not subject to forfeiture.

Defendant’s argument is misplaced. As the Court has already held, Defendant agreed to forfeit all 1.3G fireworks listed in Count 6 of the Superseding Indictment. Count 6 listed each of the fireworks involved in the June 27, 2007 sale as well as all other fireworks seized from Defendant, including those seized from his warehouse on Decoursey Pike in Taylor Mill, Kentucky. Defendant has admitted that his personal collection was stored at his warehouse on Decoursey Pike and was seized by the government. As such, Defendant has agreed to forfeit his personal collection to the extent it includes 1.3G fireworks and the Court may enforce Defendant’s plea agreement to forfeit those fireworks. See Libretti 516 U.S. at 38-42, 116 S.Ct. 356.

3. The United States’ “Objection” to Magistrate Judge Smith’s Recommended Adjudication of the objections to the United States’ Proposed Preliminary Judgment of Forfeiture

The United States originally objected to returning those fireworks on the Green List because ATF has serious concern about the safety and stability of those fireworks. Specifically, the United States asserted that it will “conditionally agree” to return the fireworks if the Court requires Defendant to enter a “hold harmless” or indemnity agreement with the United States. However, at oral argument, the government withdrew this objection and agreed to return those fireworks on the Green List (Doc. # 181, Gov’t Ex. 12). Therefore, this objection will be overruled as withdrawn.

B. Defendant’s Motion for Sanctions

Three months after he was sentenced, Defendant moved the Court to impose sanctions on the ATF. (Doc. # 119). Specifically, Defendant requested that the Court require ATF to reimburse him for the retail value of 1.4G fireworks that ATF refused to return, pay the rental costs of the conex containers that accrued while the containers were in the government’s custody, and pay Defendant “the attorney fees and expenses that he incurred to secure the return of the consumer fireworks or reimbursement for their value, including the time and expense related to prosecuting this motion.” (Doc. # 119, at 1).

In his motion, Defendant details numerous examples of bad-faith conduct on the part of the ATF. Among the examples, Defendant states that “ATF refuses to return the consumer fireworks and refuses to reimburse [him] for them” in direct disobeyance of this Court’s orders. Similarly, Defendant argues that the ATF failed to compensate him for the fireworks in conformity with a letter sent by an Assistant United States Attorney on March 11, 2009 to defense counsel stating that “ATF agreed to compensate your client for the wholesale price of those items that should be returned to him.” Instead, after repeated attempts by defense counsel to collect the money as promised, the ATF sent Defendant a letter on January 4, 2010 refusing to compensate him for the fireworks. Based on these actions and others, Defendant argues that the Court should impose sanctions against the ATF.

In her R & R, the Magistrate Judge stated that “the parties agree that the Court has the power to sanction a party for violating its orders under both its civil contempt power and the Court’s inherent authority to enforce its own orders.” (Doc. # 186, at 21). The Magistrate Judge then concluded that the government acted in bad faith in failing to comply with the undersigned’s Order to provide a complete list of 1.4G fireworks by March 11, 2009 (see Doc. # 44), and failing to return Defendant’s lawful fireworks as ordered by the undersigned. (Doc. # 186, at 22). As a result of those findings, the Magistrate Judge recommends “as a sanction that, under the Court’s inherent powers, the presiding District Judge order the Government to reimburse Defendant for expenses he incurred as a result of the Government’s use of the conex containers during the eighteen months they sat at Heritage.” (Id. at 29-80). The Magistrate Judge also recommends that “the Government be ordered to reimburse Defendant the expenses, including attorney fees, he incurred in seeking the return of his lawful property after May 11, 2009,” presumably under the Court’s inherent powers.

The government has asserted three objections to the Magistrate Judge’s recommendations. First, the government argues that the Court cannot use its inherent powers to impose monetary sanctions in a criminal case. Second, even if the Court may use its inherent powers to impose monetary sanctions in a criminal case, sovereign immunity bars imposition of such sanctions against the United States. Finally, the government asserts that sanctions are not justified because evidence does not show that any government official acted in bad faith.

Defendant has responded that this is a civil proceeding, and during the August 3 hearing, used a lengthy PowerPoint presentation to illustrate why these proceedings are civil and not criminal. Based on this characterization of the proceedings, Defendant argues the Court has the authority to sanction the government, and specifically ATF, under its inherent powers, its civil contempt power, and Federal Rule of Civil Procedure 11. Defendant also argues that the government has waived its sovereign immunity as to each of these sanctioning powers. Finally, Defendant has offered numerous examples of the government’s allegedly bad-faith conduct in support of his contention that sanctions are justified.

Before addressing the government’s particular objections, the Court must determine whether this is a civil or criminal proceeding. If this is a civil proceeding, the Court has the authority to sanction the government under Federal Rule of Civil Procedure 11 and, possibly, its inherent powers. However, if this is a criminal proceeding, the Federal Rules of Civil Procedure are inapplicable, and the Court will have to consider the government’s argument that the Court cannot impose sanctions under its inherent authority in a criminal case.

1. Civil or Criminal Proceeding

Defendant has maintained that this is a civil proceeding, although his basis for that argument has evolved over time. In his Motion for Sanctions, Defendant acknowledged that this is the “forfeiture aspect of [his] criminal proceeding,” but argued that the forfeiture proceeding was a civil proceeding. He argued that the firfeiture proceeding requires the government to prove “by a preponderance of the evidence that property shall be forfeited to the government.” (Doc. # 119, at 8). Moreover, Defendant asserted that this proceeding is governed by Federal Rule of Criminal Procedure 32.2, which incorporates provisions of the Federal Rules of Civil Procedure. (Id.). Therefore, Defendant suggests the “forfeiture aspect of a criminal prosecution ... is a civil proceeding.” (Id.).

In supplemental briefing, Defendant’s basis for suggesting this is a civil proceeding began to change. He moved away from his original acknowledgment that this was the forfeiture aspect of his criminal proceeding, and instead argued that “these proceedings stand alone, separate and apart from the criminal proceedings.” (Doc. # 196, at 10). Defendant contended that he has served his sentence and, therefore, “the decision in these proceedings can no longer be rolled into the sentence.” (Id.). However, despite his attempt to isolate these proceedings from his criminal case, Defendant acknowledged that these proceedings were governed by Federal Rule of Criminal Procedure 32.2, stating, “[i]n these proceeding, Rule 32.2 allows the court to make its finding on the forfeitability of the fireworks using a civil standard. ...” (Id. at 10-11).

At oral argument, Defendant asserted yet another reason why these proceedings should be characterized as civil. For the first time, Defendant argued that this is not a criminal forfeiture proceeding. According to Defendant, the government can only seek criminal forfeiture under 18 U.S.C. § 844(c)(1) of the twelve 1.3G fireworks he sold on June 27, 2007 to an undercover agent because these were the only fireworks related to his conviction on Count 5 of the Superseding Indictment. Defendant argued that the remaining fireworks are not subject to criminal forfeiture under § 844(c)(1) because they were not involved in the offense of conviction. Instead, Defendant suggested that he agreed to “abandon” his rights in the other 1.3G fireworks listed in the forfeiture count of the Superseding Indictment. As a result, Defendant argued that this is a civil proceeding where the Court must determine which fireworks he agreed to abandon. The Court will address each of Defendant’s arguments in turn, beginning with his most recent argument.

Defendant has waived the right to argue that this is a civil proceeding where the Court determines which fireworks he has agreed to “abandon.” Parties are not permitted to raise new arguments or issues to the district court that were not presented to the magistrate. Murr v. United States, 200 F.3d 895, 902 n. 1 (6th Cir.2000) (citing United States v. Waters, 158 F.3d 933, 936 (6th Cir.1998)). This argument is directly relevant to Defendant’s contention in his Motion for Sanctions that this is a civil proceeding, which was addressed by the Magistrate Judge. Defendant, however, failed to raise this argument at that time. Moreover, in his Motion for Sanctions, Defendant offered an entirely contradictory argument justifying his assertion that this is a civil proceeding. In the Motion, Defendant acknowledged that this is a criminal forfeiture proceeding governed by Federal Rule of Criminal Procedure 32.2, which adopts portions of the Federal Rules of Civil Procedure and uses the preponderance-of-the-evidence standard. For those reasons, Defendant argued this criminal forfeiture proceeding was actually a civil proceeding. Now, Defendant raises an “abandonment” argument in an attempt to show that this is not a criminal forfeiture proceeding at all. Because this argument is entirely inconsistent with his previous arguments, and was not presented to the Magistrate Judge, the Court finds that this argument is waived.

Despite the waiver, Defendant’s argument is also misguided. In arguing that the government cannot seek criminal forfeiture of the majority of the fireworks, Defendant fails to recognize that the Court has yet to enter a Final Judgment of Forfeiture on the twelve fireworks Defendant agrees are subject to criminal forfeiture. Instead, when the government tendered a proposed Preliminary Judgment of Forfeiture pursuant to Federal Rule of Criminal Procedure 32.2, Defendant objected that the tendered proposal was void for vagueness, unenforceable and usurped the judicial authority of the Court. As a result of that objection, the Court has yet to finally determine which fireworks are subject to criminal forfeiture pursuant to 18 U.S.C. § 844(c)(1) and Federal Rule of Criminal Procedure 32.2. That determination is a part of the current proceedings. Thus, this proceeding remains a criminal forfeiture proceeding.

A criminal forfeiture proceeding is a criminal proceeding. Criminal forfeiture is a bifurcated process. See United States v. Liquidators of European Fed. Credit Bank, 630 F.3d 1139, 1144-45 (9th Cir. 2011) (explaining the criminal forfeiture process). If a defendant is found guilty on a count supporting forfeiture during the first stage, the government may initiate the second stage by moving for entry of a preliminary order of forfeiture. Id.; Fed. R.Crim.P. 32.2(b). During that second stage, the court must determine whether the government has established the requisite nexus between the property and the offense. Liquidators of European Fed. Credit Bank, 630 F.3d at 1144-45. While Defendant is correct that the guilt phase of his proceeding is over, this criminal forfeiture proceeding is the second half of his criminal proceeding. It is not separate and apart as Defendant suggests, but instead a continuation of the criminal proceeding.

Moreover, Defendant is simply incorrect in suggesting that a criminal forfeiture proceeding shares so many similarities with a civil proceeding that it must be a civil proceeding subject to all of the Federal Rules of Civil Procedure. Foremost, criminal forfeiture proceedings are governed by Federal Rule of Criminal Procedure 32.2. That rule adopts specific rules of the Federal Rules of Civil Procedure to govern particular portions of the forfeiture proceeding. See, e.g. Fed.R.Crim.P. 32.2(b)(6)(C) and (D). Rule 32.2 does not, however, adopt the civil rules in full. Secondly, the fact that criminal forfeiture proceedings use the preponderance of the evidence standard does not transform this proceeding into a civil proceeding. Although civil proceedings do use the preponderance of the evidence standard, so do some criminal proceedings. Criminal defendants in federal court are also held to that burden when they assert various defenses. See, e.g. Dixon v. United States, 548 U.S. 1, 8, 126 S.Ct. 2437, 165 L.Ed.2d 299 (2006) (holding that jury instructions did not run afoul of the Due Process Clause when they placed the burden on the defendant to establish the existence of duress by a preponderance of the evidence). Accordingly, any similarities between the criminal forfeiture proceeding and a civil proceeding do not convert this into a “civil proceeding.”

Defendant is also incorrect in arguing that this forfeiture action should be compared to an ancillary proceeding where the civil rules are used. A criminal forfeiture action against the criminal defendant and an ancillary proceeding initiated by an innocent third party are two distinct proceedings. As stated above, the forfeiture action against a criminal defendant follows the guilt phase of the defendant’s trial. See Fed.R.Crim.P. 32.2(b)(1)(A). In that proceeding, the Court determines whether the defendant possesses property subject to forfeiture. Id. At sentencing, the forfeiture order becomes final as to the defendant. Fed.R.Crim.P. 32.2(b)(4)(A). In an ancillary proceeding, a third party files a petition asserting an interest in property to be forfeited. Fed.R.Crim.P. 32.2(c)(1). Rule 32.2 explicitly states that the ancillary proceeding is separate and apart from the defendant’s forfeiture proceeding. See Fed.R.Crim.P. 32.2(c)(4).

Ancillary proceedings are also governed by rules that do not apply to the forfeiture proceeding against the defendant. Those rules are similar to, and in some instances adopt the Federal Rules of Civil Procedure. For example, in an ancillary proceeding, the Court may entertain motions to dismiss a third party’s petition for lack of standing or failure to state a claim. Fed.R.Crim.P. 32.2(c)(1)(A). After disposing of any of those motions, the court may permit the parties to proceed with discovery under the Federal Rules of Civil Procedure and then move for summary judgment under Federal Rule of Civil Procedure 56. Fed.R.Crim.P. 32(c)(1)(B). The forfeiture proceedings against the criminal defendant do not follow these same rules. Therefore, the Court cannot assume this forfeiture proceeding is so similar to an ancillary proceeding that it must also be a “civil proceeding” governed by the federal rules. Simply put, the forfeiture proceeding is a part of a criminal defendant’s criminal proceeding. Only the Federal Rules of Criminal Procedure apply unless those rules specifically state otherwise. For all of these reasons, the Court finds that this remains a criminal proceeding and will turn to the government’s argument that inherent-power sanctions cannot be imposed in a criminal case.

2. The Court’s inherent authority to impose monetary sanctions in a criminal case

Citing the Sixth Circuit’s recent decision in United States v. Aleo, 681 F.3d 290 (6th Cir.2012), the Government argues that a district court may not exercise its inherent powers to impose monetary sanctions in a criminal case. The Government did not raise this issue to the Magistrate Judge, but instead apparently conceded that the Court could use its inherent authority to impose monetary sanctions. Specifically, each time the Government briefed the issue of sanctions under the Court’s inherent authority to the Magistrate Judge, the Government first recognized the Court’s inherent authority to impose sanctions but then argued there was no evidence of bad faith to justify sanctions under this power. (See Doc. # 134, at 9; Doc. # 183, at 10).

Defendant argues that the government has waived this argument because it was not presented to the Magistrate Judge. “Courts have held that while the Magistrate Judge Act, 28 U.S.C. § 631 et seq., permits de novo review by the district court if timely objections are filed, absent compelling reason, it does not allow parties to raise at the district court stage new arguments or issues that were not presented to the magistrate.” Murr v. United States, 200 F.3d 895, 902 n. 1 (6th Cir. 2000) (citing United States v. Waters, 158 F.3d 933, 936 (6th Cir.1998)). Although this argument has been presented for the first time on objection to the Magistrate Judge’s R & R, the Court finds compelling reason to consider the argument. The government’s argument is based solely on Aleo, which was decided on May 15, 2012, just three days before the Magistrate Judge filed her R & R. Because of the recency of