Grand Jury Subpoenas Issued to Thirteen Corporations, In re, 85-1154

• Decision Date: 15 October 1985
• Docket Number: No. 85-1154,85-1154
• Parties: -6408, 54 USLW 2258, 85-2 USTC P 9768, 19 Fed. R. Evid. Serv. 1051 In re GRAND JURY SUBPOENAS ISSUED TO THIRTEEN CORPORATIONS. UNITED STATES of America, Appellant, v. Richard ROE, Appellee.
• Court: U.S. Court of Appeals — Second Circuit

Page 43

775 F.2d 43

56 A.F.T.R.2d 85-6408, 54 USLW 2258, 85-2

USTC P 9768,

19 Fed. R. Evid. Serv. 1051

In re GRAND JURY SUBPOENAS ISSUED TO THIRTEEN CORPORATIONS.

UNITED STATES of America, Appellant, v. Richard ROE, Appellee.

No. 85-1154.

United States Court of Appeals, Second Circuit.

Argued Aug. 28, 1985.

Decided Oct. 15, 1985.

Nathan Lewin, Washington, D.C. (Miller Cassidy, Larroca & Lewin, Stephen L. Braga, Washington, D.C., of counsel), for appellee.

Stuart E. Abrams, New York City, Asst. U.S. Atty. for the S.D. of N.Y., New York City (Rudolph W. Giuliani, U.S. Atty. for the S.D. of N.Y., Paul E. Summit, New York City, of counsel), for appellant.

Before FEINBERG, Chief Judge, and KEARSE and CARDAMONE, Circuit Judges.

FEINBERG, Chief Judge:

The government appeals from an order of the United States District Court for the Southern District of New York, Vincent L. Broderick, J., granting a motion to quash grand jury subpoenas duces tecum issued to thirteen corporations. The subpoenas called for the production of corporate records. Richard Roe ¹ moved to quash on fifth amendment grounds. For the reasons stated below, the district court's order must be reversed.

I.

Pursuant to its investigation of possible tax evasion and other offenses, a grand jury in the Southern District issued subpoenas duces tecum to thirteen New York corporations calling for the production of enumerated corporate records. ² These corporations, referred to as the "Z Companies," were suspected of issuing fraudulent invoices for large amounts to the target of the grand jury investigation. Roe was connected to the corporations through bank records.

Counsel for Roe accepted service of the subpoenas on Roe's behalf; ³ thereafter, Roe moved to quash them. In March 1985, Judge Broderick held an evidentiary hearing on the motion to quash. An IRS agent testified as to the scope of the grand jury's investigation and the manner in which Roe and the Z Companies were connected to that investigation. The government then introduced bank records listing Roe as an authorized signatory on 23 corporate accounts and, in some cases, describing him as an officer. Officials from three banks testified concerning Roe's extensive involvement with the banking affairs of the corporations, although none had specific evidence of Roe's status as an officer, director or shareholder of any of the Z Companies. A rental agent also testified that he had dealt with Roe in securing rental payments and considered him to be the "principal" of several of the corporations.

Roe did not testify or call witnesses on his behalf, although he later introduced certificates of dissolution for twelve of the corporations. These documents identified an individual other than Roe--referred to as John Doe--as president, director and shareholder. We are told that Doe is a Swiss citizen who does not reside in the United States. The bank officials testified that Doe's name appeared as an authorized signatory on a number of the corporate accounts; one official recalled seeing Doe in the bank on a few occasions. Roe's son-in-law, daughter and two individuals, other than Doe, were also mentioned as transacting business on behalf of the corporations.

In the district court, Roe argued that the government's evidence established only his connection with the banking affairs of the corporations and that the records subpoenaed went well beyond banking records. He also argued that because of the government's lack of knowledge about the records of the Z Companies, his production and authentication of the documents would be testimonial in nature, that these acts could incriminate him and that he was entitled to claim his fifth amendment privilege. The government maintained that the corporations had been properly served through service of the subpoenas on Roe. This being the case, the government insisted that it was entitled to have someone produce the records on the corporation's behalf or testify that such records did not exist.

In April, Judge Broderick announced his decision to quash the subpoenas. The apparent basis for his ruling was that production by Roe, under circumstances where the existence and authenticity of the documents were not foregone conclusions, would be self-incriminatory. He cited the government's lack of information about the documents sought and its unwillingness to immunize Roe in order to obtain the documents. This appeal followed. The order quashing the subpoenas has been stayed pending appeal; Judge Broderick also ordered that the documents subpoenaed were not to be moved, transferred or destroyed.

II.

After the briefs in this appeal were filed, a panel of this court decided In re Two Grand Jury Subpoenae Duces Tecum, One Dated January 28, 1985, The Other Undated, 769 F.2d 52 (2d Cir. 1985) (In re Two Grand Jury Subpoenae), which is dispositive of many of the issues presented here. In that case, this court affirmed a district court's order denying a motion to quash two grand jury subpoenas duces tecum directed to a corporation. ⁴ The court relied on the well-established rule that a corporate representative, acting in his or her representative capacity, cannot claim a fifth amendment privilege against the production of corporate documents. Id. at 56, citing Bellis v. United States, 417 U.S. 85, 88-89, 100, 94 S.Ct. 2179, 2183-2184, 2189, 40 L.Ed.2d 678 (1974); In re Grand Jury Subpoenas Duces Tecum (Saxon Industries), 722 F.2d 981, 986 (2d Cir.1983). The only exception to this rule may occur when an individual is personally compelled to produce and authenticate corporate records and those acts are self-incriminatory. In re Two Grand Jury Subpoenae, supra, 769 F.2d at 57. The court emphasized, however, that "[t]here simply is no situation in which the fifth amendment would prevent a corporation from producing corporate records, for the corporation itself has no fifth amendment privilege." Id. at 57 (emphasis supplied), citing United States v. Barth, 745 F.2d 184, 189 (2d Cir.1984), cert. denied, --- U.S. ----, 105 S.Ct. 1356, 84 L.Ed.2d 378 (1985).

We conclude that In re Two Grand Jury Subpoenae requires reversal of the district court's order. The principals involved in these corporations have received the benefits of the corporate form and they must also accept its obligations, which include the unavailability for the corporations of a fifth amendment privilege against self-incrimination. A contrary holding would allow a corporation, whose controlling figures had involved it in criminal activity, to avoid production of corporate documents by virtue of that criminality, while all other corporations would have no such option. Since corporations have no fifth amendment privilege, this simply does not make sense.

As a preliminary matter, we find that the corporations were effectively served by service on Roe through his attorney. The district court did not make a specific determination on the issue of service, apparently because the judge quashed the subpoenas on other grounds. However, at oral argument, the judge did characterize Roe as "the major guru" of the corporations, and noted that "he is a perfectly appropriate person to serve with a subpoena." In any event, we have reviewed the evidence presented and find that it establishes that the corporations were properly served. A corporation may be served through an officer or agent explicitly or implicitly authorized to accept service of process. See Fed.R.Civ.P. 4(d)(3); In re Electric & Musical Industries, Ltd., Middlesex, England, 155 F.Supp. 892, 893 (S.D.N.Y.), appeal dismissed, 249 F.2d 308 (2d Cir.1957). Roe's involvement in the financial affairs of the corporations was sufficient to make him an agent on whom subpoenas could be served. Koupetoris v. Konkar Intrepid Corp., 535 F.2d 1392, 1395-96 (2d Cir.1976) (service on owner's managing agent adequate service); Boryk v. deHavilland Aircraft Co., 341 F.2d 666, 668-69 (2d Cir.1965) (service on the president of subsidiary adequate; label attached to the agent and lack of explicit authority to accept service not determinative).

The subpoenas were issued to the corporation, not to Roe. They do not mention him. Indeed, the government first attempted to serve John Doe, who is listed on some documents as an officer, but was unable to do so. Service was then made on Roe, as the other person known to be connected with the corporations. The records are the kind that corporations ordinarily maintain, and the subpoenas do not demand that Roe himself produce them. By directing the subpoenas to the corporations, the government must be satisfied with production by any representative of the corporations; strictly speaking, the proceedings are between the government and the corporations. Roe relies on two recent decisions of this court, but both are distinguishable. In Saxon Industries, supra, the subpoena was directed to an individual no longer connected with the corporation whose records were being sought, and in In re Katz, 623 F.2d 122 (2d Cir.1980), the subpoena was directed to an attorney. See In re Two Grand Jury Subpoenae, supra, 769 F.2d at 69 (discussing cited cases). Roe also relies on the recent in banc decision of the Third Circuit, In re Grand Jury Matter (Brown), 768 F.2d 525, 526 (3d Cir. 1985) (in banc), but in that case the subpoena was addressed to a named custodian. Indeed, the Third Circuit noted that "[r]ecords of collective entities still must be maintained, and their production can be compelled by a subpoena duces tecum addressed to the entity." Id. at 528.

In re Two Grand Jury Subpoenae also disposes of Roe's principal argument in support of the decision below. Roe urges a distinction between cases where the act of production adds little or nothing to the government's case, because the existence and authenticity of the corporate documents produced are "a foregone conclusion," and those where the act of production adds significantly to the sum...