In re Grand Jury Proceedings

• Citation: 119 BR 945
• Decision Date: 12 October 1990
• Docket Number: Misc. No. 90-1581,Civ. A. No. 89-CV-73630-DT,Bankruptcy No. 84-02713-S.
• Parties: In re GRAND JURY PROCEEDINGS. and In re JIM'S GARAGE, INC., Debtor.
• Court: U.S. District Court — Western District of Michigan

119 B.R. 945 (1990)

In re GRAND JURY PROCEEDINGS.

and

In re JIM'S GARAGE, INC., Debtor.

Misc. No. 90-1581, Civ. A. No. 89-CV-73630-DT, Bankruptcy No. 84-02713-S.

United States District Court, E.D. Michigan, S.D.

October 12, 1990.

Robin H. Kyle, Detroit, Mich., for petitioner/appellant.

Joe Mack, Detroit, Mich., for appellee in Civ. A. No. 89-73630.

Lynn A. Helland, Asst. U.S. Atty., Detroit, Mich., respondent in Misc. No. 90-1581.

OPINION AND ORDER

ROSEN, District Judge.

FACTS

These two separate cases arose out of the independent efforts of the federal grand jury impanelled in the Eastern District of Michigan and the office of the United States Trustee for the Eastern District of Michigan, respectively, to obtain the production of certain documents from Sherman Sharpe, Jr., the former Chapter 7 bankruptcy trustee of Jim's Garage, Inc., Debtor. The miscellaneous matter is before the Court on Sharpe's Motion to Quash Grand Jury Subpoena. The civil action is before the Court on Sharpe's appeal of Bankruptcy Judge Walter Shapero's December 15, 1989 Order requiring Sharpe to file his final accounting as trustee in the bankruptcy case and to turn over to the United States Trustee all documents relating to Sharpe's administration of the bankruptcy estate, which were previously withheld by Sharpe based upon his assertion of a Fifth Amendment privilege against self-incrimination. Both matters were brought before the Court for oral argument on October 4, 1990.

The bankruptcy case was commenced as a voluntary Chapter 11 case on July 23, 1984 and was subsequently converted to Chapter 7 on December 5, 1986. On December 10, 1986, Sharpe was appointed Chapter 7 Trustee.

On April 5, 1989, the United States Trustee assumed jurisdiction over bankruptcy cases in the Eastern District of Michigan. According to Sharpe, in June, 1989, Assistant United States Trustee Marion J. Mack contacted Sharpe and informed him that his review of bank records revealed criminal activity by Sharpe in conjunction with his administration of the bankruptcy estate, including violations of 18 U.S.C. Section 153.¹ Mack consequently demanded that Sharpe provide his office with an interim report and accounting of his administration of the estate within 7 days. Based upon his assertion of a Fifth Amendment privilege, Sharpe refused to supply an interim report or to turn over documents concerning the estate.

Mack then filed a motion in the Bankruptcy Court to remove Sharpe as trustee and to seek production of the records. The Bankruptcy Court heard the motion on August 27, 1989. The Bankruptcy Court initially held that the motion to remove Sharpe was moot since Sharpe had voluntarily resigned.

However, the Bankruptcy Court entered an Order on September 26, 1989 which provided as follows:

ORDER

The United States Trustee filed a Motion to Remove Trustee in this matter. The trustee, Sherman Sharpe, Jr., responded to the motion and, as part of his response, tendered his resignation as trustee.

At the hearing on the United States Trustee\'s Motion on August 21, 1989, Mr. Sharpe reiterated and clarified that the resignation is to be effective in this matter and in all cases in which he serves as trustee.

The Court having determined that the relief sought by the United States Trustee was no longer at issue, finds the Motion To Remove to be moot, and instructed the United States Trustee to prepare an order; now therefore,

It Is Ordered that Sherman Sharpe, Jr. shall file a final accounting of his administration of Jim\'s Garage, Inc. with the Court and serve a copy on the United States Trustee on or before October 27, 1989;

It Is Further Ordered that Sherman Sharpe, Jr., subject to this Court\'s ruling on his assertion of the 5th Amendment privilege against self-incrimination, shall turn over to the United States Trustee, all bank statements, deposit slips, cancelled checks, bank reconciliations, and any and all other banking and/or financial records relating to any checking or savings account maintained for the estate of Jim\'s Garage, Inc.

It Is Further Ordered that Sherman Sharpe, Jr., subject to this Court\'s ruling on his assertion of the 5th Amendment privilege against self-incrimination, shall turn over to the United States Trustee, all other documents and records relating to the case of Jim\'s Garage, Inc.

It Is Further Ordered that the United States Trustee shall appoint a successor trustee, pursuant to 11 U.S.C. Section 703(a), to complete the administration of the estate of Jim\'s Garage, Inc.

It Is Further Ordered that Sherman Sharpe, Jr. shall cooperate with the United States Trustee and any successor trustee appointed by the United States Trustee, consistent with and in accordance with the laws of the United States, in furtherance of the successful completion of the administration of the estate Jim\'s Garage, Inc.

/s/ Walter Shapero United States Bankruptcy Judge Date: Sep 26, 1989

On November 24, 1989, 118 B.R. 949, the Bankruptcy Judge issued an opinion denying Sharpe's assertion of the Fifth Amendment privilege against self-incrimination. The Bankruptcy Judge ruled that Sharpe must comply with the terms of his September 26, 1989 Order on or before December 15, 1989.

On November 28, 1989, the Bankruptcy Judge heard Sharpe's motion for an extension of time to file the final accounting. The Bankruptcy Court granted this motion and entered an Order giving Sharpe until January 19, 1990 to file the final accounting. The December 15, 1989 Order, which is the subject of this appeal, provides, in toto, as follows:

Former Trustee Sherman Sharpe, Jr., having filed a motion for extension of time for the filing of his final accounting, the parties being represented by counsel, the court having heard oral argument and being otherwise fully advised in the premises;

NOW THEREFORE IT IS HEREBY ORDERED that Former Trustee Sherman Sharpe, Jr., shall file his final accounting in the within matter on or before January 19, 1990;

IT IS FURTHER ORDERED that Former Trustee Sherman Sharpe, Jr., shall turn over all documents respecting his administration of the within estate, which were previously withheld by said trustee based upon his assertion of a Fifth Amendment privilege, on or before December 15, 1989.

/s/ Walter Shapero United States Bankruptcy Judge Dated: 12-12-89 Approved /s/ Marion J. Mack, Jr. Assistant U.S. Trustee

This appeal followed. The Court notes that this December 15, 1989 Order, from which this appeal was taken, implicitly incorporates the terms of the September 26, 1989 Order, as far as the scope of the documents which Sharpe was ordered to turn over to the United States Trustee is concerned.

Meanwhile, the grand jury began investigating Sharpe's administration of the bankruptcy estate, apparently to determine whether Sharpe embezzled from the estate, in violation of 18 U.S.C. Section 153. On August 13, 1990, Sharpe was served with a subpoena from the grand jury, requesting that he appear on August 29, 1990 to testify before the grand jury and demanding that he bring with him certain enumerated bank checks and bank receipts "that pertain to financial transactions involving the bankruptcy estate of Jim's Garage, Inc." On August 30, 1990, Sharpe filed his Motion to Quash Grand Jury Subpoena, which is presently also before the Court. The Court notes that the checks and bank receipts demanded by the grand jury fall within the scope of the Bankruptcy Court's September 26, 1989 and December 15, 1989 Orders.

DISCUSSION

A. PRODUCTION OF DOCUMENTS

Sharpe argues, in both cases, that he cannot be compelled, consistent with his Fifth Amendment right against self-incrimination, to produce either the documents ordered by the Bankruptcy Court or the documents subpoenaed by the grand jury, contending that such compelled production of documents would amount to compelled testimony and would force him to concede the existence (or absence)² of the documents requested, to concede his possession and control over the requested documents, and to restate, repeat or affirm the truth of the documents' contents. In addition, that provision in the Bankruptcy Court's December 15, 1989 Order that requires Sharpe to file a final accounting would literally compel Sharpe to create evidence against himself.

In response, the United States Trustee, with respect to the bankruptcy appeal, and the United States Attorney, with respect to the grand jury subpoena, both argue that the Fifth Amendment does not shield an individual from producing records that he was required by law to maintain, citing Shapiro v. United States, 335 U.S. 1, 68 S.Ct. 1375, 92 L.Ed. 1787 (1948); In re Grand Jury Subpoena Duces Tecum Served upon Underhill, 781 F.2d 64 (6th Cir.1986), cert. denied Underhill v. United States, 479 U.S. 813, 107 S.Ct. 64, 93 L.Ed.2d 23 (1986). This is, indeed, the grounds upon which the Bankruptcy Court below overruled Sharpe's claim of privilege.

In Underhill, the Sixth Circuit held that an individual can, notwithstanding the Fifth Amendment, be compelled to produce private records if the requested records fall within the "required records" exception to the Fifth Amendment. Id., at 67.

In order to meet this narrow exception, three requirements must be met. First, the purposes of the government\'s inquiry must be essentially regulatory, rather than criminal. Second, the records must contain the type of information that the regulated party would ordinarily keep. Third, the records "must have assumed `public aspects\' which render them at least analogous to public documents." Grosso v. United States, 390 U.S. 62, 67-68, 88 S.Ct. 709, 713, 19 L.Ed.2d 906 (1968) (interpreting Shapiro v. United States, 335 U.S. 1, 68 S.Ct. 1375, 92 L.Ed. 1787 (1948)).

Id.

The court went on to apply this 3-part test to a grand jury subpoena requiring an independent automobile dealer to produce its odometer mileage statements in conjunction with the grand jury's investigation...