Grand Jury Investigation U.S. Attorney Matter No. 89-4-8881-J, In re

• Decision Date: 03 January 1991
• Docket Number: 90-4020,Nos. 90-3930,s. 90-3930
• Citation: 921 F.2d 1184
• Parties: 32 Fed. R. Evid. Serv. 487 In re GRAND JURY INVESTIGATION U.S. ATTORNEY MATTER NUMBER 89-4-8881-J. Appeal of Steven R. HELLER.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1184

921 F.2d 1184

32 Fed. R. Evid. Serv. 487

In re GRAND JURY INVESTIGATION U.S. ATTORNEY MATTER NUMBER 89-4-8881-J Appeal of Steven R. HELLER.

Nos. 90-3930, 90-4020.

United States Court of Appeals Eleventh Circuit.

Jan. 3, 1991.

Samuel S. Jacobson, Albert Datz, Datz, Jacobson & Lembcke, P.A., Jacksonville, Fla., for appellant.

Robert Genzman, Kathy O'Malley, Asst. U.S. Atty., U.S. Attorney's Office, Jacksonville, Fla., for appellee.

Appeal from the United States District Court for the Middle District of Florida.

Before JOHNSON, HATCHETT, and ANDERSON, Circuit Judges.

ANDERSON, Circuit Judge:

These consolidated appeals involve the propriety of a district court order directing appellant Steven R. Heller ("Heller"), a Jacksonville, Florida attorney, and Heller's legal secretary, Jamie Brown Sausedo ("Sausedo"), to comply with certain Grand Jury subpoenae duces tecum. No. 90-3930 is a challenge to the district court's September 24, 1990 order upholding the subpoenae directing Heller to produce certain trust account records and directing Sausedo to produce certain law practice records as a proper "substitute custodian," but quashing the subpoena directing Heller to produce such law practice records. No. 90-4020 is Heller's appeal from the district court's November 6, 1990 civil contempt order entered after Heller refused to comply or permit Sausedo to comply with the September 24 order.

I. STATEMENT OF THE CASE

Heller is a member of the Florida Bar engaged in the practice of law in Jacksonville, Florida. Heller operates his law practice as a sole proprietorship in which Sausedo is employed as Heller's secretary. Sometime in 1989, while investigating the financial affairs of one of Heller's clients (the subject of a state cocaine trafficking prosecution), the Internal Revenue Service ("IRS") discovered numerous financial transactions for which Heller had been the closing attorney. Many of these transactions involved loans in nominee names. Suspecting that Heller was involved in a money laundering scheme and had omitted income from his tax returns, the IRS widened its investigation to include Heller. IRS agents interviewed Heller, and although he declined to discuss his income tax returns, Heller acknowledged that he had been closing attorney for the suspect financial transactions and that he had used cocaine in previous years.

During the interview, Sausedo was called on to retrieve or provide some financial records and information. The agents also noted that Sausedo had provided Heller's accountant with information regarding Heller's finances from time to time. Both Heller's personal and business finances are handled through his law office and Sausedo. According to Sausedo's Grand Jury testimony, her duties as secretary include a wide range of administrative and record-keeping duties. Sausedo maintains Heller's legal and financial records, including both business and personal finances, in various ledgers and files. In fact, although Heller directs Sausedo in the handling of his affairs, Sausedo exercises considerable control over the files, records, and ledgers that were subpoenaed by the government.

Two subpoenae were subsequently issued calling for Heller ¹ to appear before the Grand Jury and to produce certain documents. The first subpoena (the "trust account subpoena"), called for production of:

1. All law practice trust account records of Steven R. Heller from January 1, 1983 through December 31, 1989, to include but not limited to the following type documents:

A. Financial Institution documents such as statements, cancelled checks, deposit slips, withdrawal slips, check registers and/or check stubs and copies of items deposited.

B. Trust account ledgers.

C. Income ledgers or journals.

D. Expense ledgers or journals.

E. General ledgers or journals.

F. Client ledgers.

G. Invoices to clients.

H. Account Receivable ledgers.

I. Account Payable ledgers.

The district court upheld this trust account subpoena on the ground, inter alia, that Rule 5-1.2(b) of the Rules Regulating the Florida Bar ("Florida Bar Rule 5-1.2(b)") required Heller to maintain all of the requested records.

The second subpoena (the "law practice records subpoena") called for the production of:

1. All law practice records of Steven R. Heller from January 1, 1983 through December 31, 1989, to include but not be limited to the following type documents, except those trust account documents which are requested by separate subpoena:

A. Financial institution documents, through which law firm business is transacted, such as statements, cancelled checks, deposit slips, withdrawal slips, check registers and/or check stubs and copies of items deposited.

B. General ledgers.

C. Account receivable ledgers.

D. Account payable ledgers.

E. Cash disbursement journal.

F. Cash receipt journals.

G. General journals.

H. Invoices to clients and/or statements.

I. Payroll records.

J. Appointment books.

2. All client files of loan closings, mortgages, notes and/or promissory notes wherein the lender is an individual rather than a corporation from January 1, 1983 through December 31, 1989.

3. All client files from January 1, 1983 through December 31, 1989 for [61 named individuals, including Leo Lourcy, his wife, and members of their families.]

In response to Heller's argument that the law practice records subpoena was overbroad and oppressive, the district court construed paragraph 1 of the subpoena to compel production only of those records falling within categories A through J. Apparently satisfied with that ruling, the parties do not contest this issue on appeal. ²

Although the district court held that the contents of the documents described in the law practice records subpoena were not privileged because they were voluntarily created business records, the district court ruled the act of producing the documents was within the Fifth Amendment privilege. The district court therefore quashed the law practice records subpoena with regard to Heller. ³ The identical subpoena issued to Sausedo, however, was upheld on the ground that Sausedo was a proper "substitute custodian" such that production of the documents by her would not be tantamount to compelling Heller to produce the documents.

Pending this appeal, the district court agreed to postpone actual confinement of Heller. The district court also followed the parties' suggestion that Heller's attorney, Mr. Albert J. Datz, could serve as interim custodian of the records pending this appeal. ⁴

II. DISCUSSION

In its September 24, 1990 order, the district court ruled that the trust account subpoena was valid as to Heller because all of the material sought was required by Florida Bar Rule 5-1.2(b). At that time, Heller argued that the records falling outside of the scope of Rule 5-1.2(b) were potentially privileged. The district court, however, ordered production of all documents called for by the trust account subpoena, finding that the scope of Rule 5-1.2(b) encompassed all of the requested documents. Subsequent to the September 24, 1990 order, Heller asserted that certain documents called for by the trust account subpoena concerned his personal finances and were therefore privileged. Heller also stated this objection at the November 6, 1990 contempt hearing. R4-5. Heller made no document-by-document assertion of privilege, perhaps relying on a stipulation entered into by Heller and the government. ⁵ Heller also argues that Sausedo did not have sufficient control of the documents described in the law practice records subpoena to support the district court's finding that Sausedo was a substitute custodian for such documents.

The government urges that Heller has forfeited his Fifth Amendment privilege as to any documents that are personal in nature because he has commingled his personal and law practice trust account records. The government points out that such commingling is in violation of Florida Bar Rules that require trust accounts to be kept separate from other accounts. ⁶ The government also argues that the district court's ruling--that production of the law practice records by Sausedo as substitute custodian would not violate Heller's Fifth Amendment rights--should be extended to the trust account records as well. Because we agree with this last argument, we need not address Heller's claims of privilege. ⁷

In Couch v. United States, 409 U.S. 322, 328, 93 S.Ct. 611, 616, 34 L.Ed.2d 548 (1973) (emphasis in original), the Supreme Court stated that "the Fifth Amendment privilege is a personal privilege: it adheres basically to the person, not to information that may incriminate him." Employing this rationale, the Couch Court held that the financial records of a sole proprietress in the possession of her accountant were not privileged. Similarly, in Fisher v. United States, 425 U.S. 391, 401, 96 S.Ct. 1569, 1576, 48 L.Ed.2d 39 (1976) (quoting United States v. Nobles, 422 U.S. 225, 233 n. 7, 95 S.Ct. 2160, 2167 n. 7, 45 L.Ed.2d 141 (1975)), the Court declared:

We cannot cut the Fifth Amendment completely loose from the moorings of its language, and make it serve as a general protector of privacy--a word not mentioned in its text and a concept directly addressed by the Fourth Amendment. We adhere to the view that the Fifth Amendment protects against "compelled self-incrimination, not [the disclosure of] private information."

See also In re Grand Jury Subpoena Duces Tecum dated May 29, 1987, 834 F.2d 1128, 1131 (2d Cir.1987) ("[M]aterial owned by one person may, at least under some circumstances, be subpoenaed from a third party non-owner in possession without impinging on the Fifth Amendment rights of the owner.") See generally 1 W. LaFave & J. Israel, Criminal Procedure Sec. 8.12(d), at 696-97 (1984). Our predecessor circuit has applied this rationale to enforce a subpoena calling for production of tax records in the hands of an accountant. See, e.g., United States v. Jones, 630 F.2d 1073...