979 F.2d 939 (2nd Cir. 1992), 333, In re Six Grand Jury Witnesses

Docket Nº:333, 334, 335, 336, Dockets 92-6147, 92-6149, 92-6151, 92-6157.
Citation:979 F.2d 939
Party Name:In re SIX GRAND JURY WITNESSES. UNITED STATES of America, Appellee, v. John DOE # 1; John Doe # 3; John Doe # 5; John Doe # 6, Respondents-Appellants, Richard Roe; XYZ Corporation, Intervenors-Appellants.
Case Date:November 19, 1992
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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979 F.2d 939 (2nd Cir. 1992)


UNITED STATES of America, Appellee,


John DOE # 1; John Doe # 3; John Doe # 5; John Doe # 6,


Richard Roe; XYZ Corporation, Intervenors-Appellants.

Nos. 333, 334, 335, 336, Dockets 92-6147, 92-6149, 92-6151, 92-6157.

United States Court of Appeals, Second Circuit

November 19, 1992

Argued Sept. 2, 1992.

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[Copyrighted Material Omitted]

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Peter J. Romatowski, Washington, D.C. (Clifton S. Elgarten, Cary H. Plamondon, Crowell & Moring, Washington, D.C.; Vincenti & Schickler, New York City, of counsel), for appellant XYZ Corp.

Herald Price Fahringer, New York City (Diarmuid White, Lipsitz, Green, Fahringer, Roll, Salisbury & Cambria, of counsel), for appellant Richard Roe.

Peter J. Tomao, Asst. U.S. Atty. for the Eastern District of New York (Andrew J. Maloney, U.S. Atty., Peter A. Norling, Emily Berger, Charles S. Kleinberg, Asst. U.S. Attys. for the Eastern District of New York, of counsel), for appellee U.S.

John F. Kaley, Weinberg, Kaley & Pergament, P.C., Garden City, N.Y., of counsel; James O. Druker, Kase & Druker, Garden City, N.Y., of counsel, filed a joint brief for respondents-appellants John Doe # 1, John Doe # 3, John Doe # 5, John Doe # 6.

Before FEINBERG, NEWMAN, and CARDAMONE, Circuit Judges.

CARDAMONE, Circuit Judge:

Believing it had been deliberately defrauded by a subcontractor under a government contract, the United States commenced a criminal investigation and summoned several company employees to testify before a grand jury. When the contractor corporation learned it was the target of a criminal investigation it retained counsel, consulted with company officials and implemented an approach to evaluating the work performed that it believed would demonstrate that the government had received fair value for the equipment furnished. The employees responsible for monitoring the costs on the subject government project and who performed the analysis for defense counsel are the ones called before the grand jury. Their refusal to answer certain questions based on their corporate employer's assertion of the attorney-client privilege and the attorney's work product privilege precipitated this appeal.

Squarely presented for reconciliation are the seemingly conflicting interests of disclosure and secrecy. Discovery, designed to advance the pursuit of truth, takes the "sporting" element out of litigation by eliminating surprise. The inviolability of confidential communications between attorney and client and the protected privacy of the attorney's work product also contribute to the efficient functioning of the adversarial system's search for truth. Each ceases to be a privilege when it ceases to be a secret. The question before us asks to what extent may the prosecution obtain access to information defendant counsel alleges it has gathered; or, to phrase it another way, may these employees be compelled--despite the company's assertion of the two privileges--to testify before the grand jury with respect to their activities. With a few exceptions, we think they may be so compelled.


The facts in this case are straightforward and undisputed. XYZ Corporation designs and builds timing devices for, among other uses, navigating satellites. A grand jury in the Eastern District of New York is investigating allegations that XYZ and its president, Richard Roe, conspired to defraud the United States in violation of 18 U.S.C. §§ 286 and 371 and committed major fraud against the United States in violation of § 1031 by submitting claims containing false statements in violation of § 1001. The investigation concerns XYZ's performance under contracts to design and build a frequency source amplifier, a voltage controlled crystal oscillator, a frequency multiplier power amplifier, a calibration upconverter, a reference generator unit, and a surface acoustic wave oscillator. The government believes XYZ illegally inflated its costs when submitting vouchers for work performed as a subcontractor on contracts called the "Fox" contracts that XYZ had with a prime government contractor producing this sophisticated space equipment.

The investigation of XYZ for making false and inflated claims for payment under the Fox contracts started after "stop work" orders were issued in February

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1988. Subsequently, certain of the Fox contracts were terminated altogether; others were renegotiated and continued on a reduced scale. XYZ's payment claims relate to the work it performed up to the date of the stop-work orders. It also made proposals on the reconfigured continuing contracts. The government alleges that XYZ created false books and records in support of its termination payment claims and proposals and that its original corporate records on these contracts were either destroyed or discarded. At the commencement of its investigation in 1990 the government obtained two broad search warrants and a subpoena for "all documents related to the Fox contracts," resulting in its gathering truckloads of documents from XYZ amounting to at least 170 boxes of corporate records.

XYZ retained counsel to represent it in connection with the investigation. In January 1991 defense counsel requested that an analysis of costs be made by certain...

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