MATTER OF GRAND JURY EMPANELLED MARCH 19, 1980

• Decision Date: 04 February 1981
• Docket Number: Misc. No. 80-53.
• Citation: 541 F. Supp. 1
• Parties: In the Matter of the GRAND JURY EMPANELLED MARCH 19, 1980.
• Court: U.S. District Court — District of New Jersey

541 F. Supp. 1

In the Matter of the GRAND JURY EMPANELLED MARCH 19, 1980.

Misc. No. 80-53.

United States District Court, D. New Jersey.

February 4, 1981.

William W. Robertson, U. S. Atty. by James P. Ulwick, Asst. U. S. Atty., Newark, N. J., for plaintiff.

Checki & Politan by Glenn T. Leonard, Lyndhurst, N. J., for Milton Reid.

SAROKIN, District Judge.

The court has been called upon to determine the extent to which the Fifth Amendment allows the target of a grand jury investigation to resist the production of business records sought by the grand jury by a subpoena duces tecum. The issue arises upon the motion of the target, Mr. Milton Reid, to quash five subpoenas directing him to turn over documents and records relating to the operation of several businesses of which he is the sole proprietor. For the reasons stated below, the motion is granted in part and denied in part.

I. BACKGROUND

In the fall of 1980, a United States Grand Jury began an investigation into alleged fraudulent activity relating to the submission of bids, bid bonds, and price quotes by various companies to Hudson County and municipal entities of Hudson County. In addition, the grand jury is delving into the awarding of bids and contracts by Hudson County and the municipalities to these companies, and the alleged diversion of income by these companies to circumvent the Internal Revenue laws. The investigation to date has centered around the involvement of Mr. Reid and of his several companies which do business with these municipal entities. Each of the companies involved is a sole proprietorship owned by Mr. Reid.

On November 19, 1980, the grand jury issued two subpoenas to Mr. Reid requiring production of (1) the telephone toll records of several companies of which he is a principal, and (2) "all records including but not limited to bank statements, cancelled checks, check stubs and deposit tickets, for the period January 1, 1977 to present" for four accounts held by Mr. Reid or his companies.

On November 25, 1980, the grand jury issued a subpoena to Mr. Reid calling for production of "any and all records as per the attached Schedule A for Eastern Equipment and Supply Company for the period January 1, 1976 to present." Schedule A lists twenty-eight items, including such documents as general ledgers, general journals, paid bills, invoices; payroll records, contracts and copies of contracts (including all retainer agreements), tax returns, safe deposit box records, all W-2 forms for each partner, associate and employee and workpapers. Another subpoena was issued on December 19, 1980, seeking access to a laundry list of documents relating to High Point Equipment and Supply Company.

Finally, on December 29, 1980, the grand jury directed Reid to produce "any and all bank statements and cancelled checks for the period January 1, 1976 to present" for accounts of his companies maintained at an off-shore bank.

Mr. Reid is resisting production of these documents and has filed the instant application to quash the five subpoenas, relying upon his Fifth Amendment right against self-incrimination.¹

II. DISCUSSION

The Fifth Amendment provides that "No person shall be compelled in any criminal case to be a witness against himself." Although the Fifth Amendment does not protect the records of corporations, unincorporated associations or partnerships, a sole proprietor can invoke the privilege to his benefit. Bellis v. United States, 417 U.S. 85, 87-88, 94 S.Ct. 2179, 2182-2183, 40 L.Ed.2d 678 (1974); I. C. C. v. Gould, 629 F.2d 847, 859 n.22 (3d Cir. 1980); In Re Grand Jury Empanelled (Colucci), 597 F.2d 851, 859 (3d Cir. 1979); United States v. Doe, 628 F.2d 694, 695 (1st Cir. 1980); In Re Grand Jury Proceedings, 601 F.2d 162, 166 (5th Cir. 1979). Because the documents and records pertain to businesses owned by Mr. Reid as sole proprietor, the court must determine whether the Fifth Amendment rights of Mr. Reid would be infringed by enforcement of the grand jury subpoenas.

The Fifth Amendment is implicated in a claim of privilege relating to the production of business records only when an individual "is compelled to make a testimonial communication that is incriminating." Fisher v. United States, 425 U.S. 391, 408, 96 S.Ct. 1569, 1579, 48 L.Ed.2d 39 (1976). Therefore, before a district court may quash a subpoena directing the production of documents or records, it

"must be satisfied that three requirements have been met: (1) compulsion of a (2) testimonial communication that is (3) incriminating.

In Re Grand Jury Empanelled (Colucci), 597 F.2d 851, 860 (3d Cir. 1979) (emphasis in original). Because the subpoena supplies the compulsion and it is conceded by the government that the material sought is or may be incriminating, the focus in this case is on the second requirement — that there be a testimonial communication.

In so focusing, the relevant inquiry is not whether the subpoenaed documents on their face reveal incriminating communications, but whether the act of producing the documents has communicative aspects which warrant Fifth Amendment protection. Fisher v. United States, 425 U.S. 391, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976). In yielding to the command of the subpoena, Mr. Reid may be required to...