State v. Richard, Docket No. K

• Decision Date: 01 July 1997
• Docket Number: Docket No. K
• Citation: 697 A.2d 410
• Parties: STATE of Maine and Securities Administrator v. Paul RICHARD, et al. en-97-192.
• Court: Maine Supreme Court

Page 410

697 A.2d 410

STATE of Maine and Securities Administrator v. Paul RICHARD, et al.

Docket No. Ken-97-192.

Supreme Judicial Court of Maine.

Argued June 16, 1997.

Decided July 1, 1997.

Andrew Ketterer, Attorney General, Peter J. Brann (orally), Linda J. Conti, Asst. Attys. Gen., Augusta, for plaintiff.

Leonard I. Sharon (orally), Sharon, Leary & DeTroy, Auburn, for defendant.

Before WATHEN, C.J., and ROBERTS, GLASSMAN, RUDMAN, and LIPEZ, JJ.

LIPEZ, Justice.

¶1 Paul Richard ¹ appeals from the judgment of the Superior Court (Kennebec County, Marden, J.) finding him in contempt of orders entered in May (Atwood, J.) and August 1996 (Calkins, J.), and incarcerating him until he submits an accounting of his sales of certain securities. Richard contends that the court erred by determining that he waived his right to assert his privilege against self-incrimination, U.S. Const. amends. V, XIV, in response to its orders that he provide an accounting, and that the court abused its discretion by finding him in contempt of those orders. We disagree and affirm the judgment.

I.

¶2 In March 1996 the State filed a nine-count civil complaint alleging violations of the Revised Maine Securities Act, 32 M.R.S.A. §§ 10101-10713 (1988 & Supp.1996), against HER, Inc., Paul Richard, Steven A. Hall, and David J. Hall. The only party to this appeal is Richard, who was charged with offering and selling securities within Maine that were neither registered nor exempt from registration pursuant to section 10401 and, as a treasurer and therefore a "control person" pursuant to section 10602(3), with being secondarily liable for the material misrepresentations allegedly made by the Halls, who were charged pursuant to section 10201(2). ²

¶3 The State also sought a temporary restraining order and a preliminary injunction to enjoin the defendants from selling unregistered securities. In March the court issued the temporary restraining order and set the matter for a preliminary injunction hearing. Attached to the State's preliminary injunction motion was an affidavit of the Securities Division's chief investigator stating that, before filing suit, the Division had sought a complete accounting and an assurance that the defendants would stop selling unregistered securities, and had received only an inadequate accounting and false assurances in response. On the eve of the preliminary injunction hearing, Richard informed an investor in a rescission letter that "[t]here is a possibility that I may have sold securities in violation of the Revised Maine Securities Act, including Sections 10201, 10301, 10401." Richard did not invoke his Fifth Amendment privilege against self-incrimination in response to the State's motions. After the preliminary injunction hearing, he objected to the accounting only on the ground that it was an inappropriate remedy without mentioning his Fifth Amendment rights.

¶4 In May the court issued the preliminary injunction, finding that Richard and the other defendants had violated and were continuing to violate 32 M.R.S.A. § 10401 by selling unregistered securities. The court ordered each of the defendants to produce within ten days an accounting identifying

the amounts, location and nature of all the proceeds of all sales of notes or other evidences of indebtedness issued by HER, Inc., and/or by Paul Richard (and all assets derived from those proceeds[) ]; and, by name, address and telephone number, all known investors in notes or other evidences of indebtedness issued by HER, Inc., and/or Paul Richard, the date upon which each investment was made, the amount invested by each investor and the total amount of principal owed to each investor.

In June 1996 the State filed its first motion for civil contempt in response to the defendants' failure to submit such accountings within the court's deadline. At the motion hearing in August, Richard agreed to provide the accounting within ten days, and the court ordered him to do so. In September, in his capacity as treasurer of HER, Inc., Richard submitted an accounting, which he failed to supplement after the State notified him of its inadequacy. In December the State filed a renewed motion for civil contempt contending that the accounting filed by Richard was "vague" and "incomplete," with "hundreds of thousands of dollars [of transactions] unaccounted for." In his objection, Richard raised for the first time his Fifth Amendment privilege against self-incrimination and requested a hearing to determine his right to assert the privilege and thereby declined to provide the accounting.

¶5 Prior to and at the hearing in January on the State's motion, Richard requested that the court take testimony before making a determination of the validity of his Fifth Amendment privilege. The court declined to do so. In February the court found Richard in contempt of both the preliminary injunction issued in May and the follow-up order issued in August, and ordered him committed to the Kennebec County jail until he submitted a complete accounting.

¶6 Richard filed a motion to alter the judgment, arguing that he was entitled to an evidentiary hearing before a contempt order issued, and for a stay pending that hearing. The court granted the stay and held a hearing to determine whether Richard had the right to invoke his Fifth Amendment privilege. At the hearing Richard presented evidence allegedly showing that a series of events subsequent to September 1996 demonstrated that the State intended to prosecute him for criminal wrongdoing pursuant to section 10604(1) of the Act, thereby creating in him for the first time reasonable apprehension of criminal prosecution warranting his assertion of his Fifth Amendment rights in response to the State's December motion for contempt.

¶7 In March the court issued an order finding that Richard had failed to establish a valid objection pursuant to the Fifth Amendment, that he had not asserted the privilege in good faith because he "continues to engage in [the activities which have been specifically enjoined]," that he had been willing to submit an incomplete accounting thereby "disclosing some transactions and not others," that none of the State's statements or activities altered the possibility pursuant to the "circumstances of the allegations of the complaint and all of its implications" that he would be subject to a criminal prosecution, that he had waived his Fifth Amendment rights "on at least two occasions," and that he would be incarcerated as of April 15, 1997 and remain so until he produced "the accounting ordered in the preliminary injunction."

¶8 Richard filed an appeal of the contempt order with us, and filed a motion in the Superior Court for a stay pending the appeal, arguing that although the accounting he submitted may not have been "complete," there had been no hearing to determine whether the accounting was inadequate. After an evidentiary hearing in April 1997, the court found that the accounting produced, although signed by Richard, was insufficient as to his individual activities. The court also ruled that Richard's conduct otherwise had been contumacious, denied his motion for a stay pending appeal, and ordered him incarcerated until he produced an adequate accounting. Richard's subsequent motion to us for a stay pending appeal was denied, although he was granted an expedited schedule for the briefing and hearing of this matter.

II.

¶9 When application of the final judgment rule would not further its purpose, we have not hesitated to apply the "few, narrow and well-defined" exceptions to that rule. Department of Human Servs. v. Lowatchie, 569 A.2d 197, 199 (Me.1990). In this instance, when a failure to review the court's contempt order would both "preclude any effective review" and "result in irreparable injury," we review the court's contempt order pursuant to the "death knell" exception to the final judgment rule. State v. Maine State Employees Assoc., 482 A.2d 461, 463-64 (Me.1984).

III.

¶10 We review a court's civil contempt order for an abuse of discretion, and the underlying factual determinations for clear error. Weiss v. Brown, 1997 ME 57, p 7, 691 A.2d 1208; McKinley v. McKinley, 651 A.2d 821, 824 (Me.1994). A court's finding is clearly erroneous only if there is no competent evidence in the record to support it. Zink v. Zink, 687 A.2d 229, 232 (Me.1996).

¶11 The Fifth Amendment to the United States Constitution declares in part that "[n]o person ... shall be compelled in any criminal case to be a witness against himself." That "guarantee against testimonial compulsion," Hoffman v. United States, 341 U.S. 479, 486, 71 S.Ct. 814, 818, 95 L.Ed. 1118 (1951), is applicable to the states through the Fourteenth Amendment, Malloy v. Hogan, 378 U.S. 1, 6, 84 S.Ct. 1489, 1492, 12 L.Ed.2d 653 (1964). The Fifth Amendment privilege "can be asserted in any proceeding, civil or criminal, administrative or judicial, investigatory or adjudicatory," Kastigar v. United States, 406 U.S. 441, 444, 92 S.Ct. 1653, 1656, 32 L.Ed.2d 212 (1972), and applies to the compelled preparation of incriminating documents, United States v. Doe, 465 U.S. 605, 610-11, 104 S.Ct. 1237, 1240-42, 79 L.Ed.2d 552 (1984). The privilege "not only extends to answers that would in themselves support a conviction ... but likewise embraces those which would furnish a link in the chain of evidence needed to prosecute the claimant." 341 U.S. at 486, 71 S.Ct. at 818 (citation omitted); see also State v. Linscott, 521 A.2d 701, 703 (Me.1987) (whether criminal investigation has commenced is irrelevant to claim of Fifth Amendment privilege). This protection, however, is confined to instances in which there is reasonable cause to apprehend such danger from a direct answer. 341 U.S. at 486, 71 S.Ct. at 818; Collett v. Bither, 262 A.2d 353, 358 (Me.1970). For a court to sustain a claim of the privilege against self-incrimination,

it need only be evident from the...