U.S. v. McLaughlin, No. 96-1982

CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)
Writing for the CourtSCHWARZER; BECKER
Citation126 F.3d 130
Parties-6436 UNITED STATES of America v. Russell McLAUGHLIN, Jr., Appellant inUNITED STATES of America v. Mark McLAUGHLIN, Appellant in
Decision Date11 September 1997
Docket NumberNos. 96-1982,No. 96-2000,No. 96-1982,96-2000

Page 130

126 F.3d 130
80 A.F.T.R.2d 97-6436
UNITED STATES of America
v.
Russell McLAUGHLIN, Jr., Appellant in No. 96-1982.
UNITED STATES of America
v.
Mark McLAUGHLIN, Appellant in No. 96-2000.
Nos. 96-1982, 96-2000.
United States Court of Appeals,
Third Circuit.
Argued June 2, 1997.
Decided Sept. 11, 1997.

Page 132

Robert E. Welsh, Jr., (Argued) Catherine M. Recker, Welsh & Recker, P.C., Philadelphia, PA, for Appellants Russell McLaughlin, Jr. and Mark McLaughlin.

Maureen Barden, Assistant United States Attorney (Argued), Walter S. Batty, Jr., Assistant United States Attorney, Philadelphia, PA, for Appellee United States of America.

Before: BECKER, SCIRICA, Circuit Judges, and SCHWARZER, * Senior District Judge.

OPINION OF THE COURT

SCHWARZER, Senior District Judge.

Russell and Mark McLaughlin (the "McLaughlins") appeal from their convictions and sentences for income tax evasion. The McLaughlins and their relatives own Building Inspection Underwriters ("BIU"), a close corporation that conducts building inspections for various New Jersey and Pennsylvania municipalities. Russell was president of BIU, and Mark was an officer of the corporation. In 1988, BIU opened two bank accounts, one with New Jersey National Bank ("NJNB") and the other with First Fidelity Bank ("First Fidelity"). During 1988, over $700,000 in corporate receipts was deposited in each of those accounts. Neither BIU nor the McLaughlins declared the roughly $1,400,000 deposited in the accounts as income on BIU's 1988 federal tax returns.

Both McLaughlins were convicted of attempting to evade assessment of BIU's 1988 income taxes in violation of 26 U.S.C. § 7201. Russell was also convicted of subscribing and filing a false 1988 income tax return on behalf of BIU in violation of 26 U.S.C. § 7206(1). They were acquitted of conspiring to defraud the United States. See 18 U.S.C. § 371. The McLaughlins were sentenced on the basis of an adjusted offense level of 17. The district court sentenced them both to twenty-four months in custody and three years supervised release and fined each $100,000.

Page 133

The district court had jurisdiction under 18 U.S.C. § 3231, and we have jurisdiction under 28 U.S.C. § 1291.

I. APPLICATION OF THE FIFTH AMENDMENT PRIVILEGE TO NONPRODUCTION OF SUBPOENAED DOCUMENTS

In 1989, the IRS served a summons on Russell, in his capacity as BIU's corporate custodian, requesting production of certain financial records. At trial, the government was permitted to show that Russell produced records and that the production did not include any record of the NJNB account. The government was also allowed to argue that this omission was evidence of intentional evasion of tax assessment. 1

Russell contends that admission of this evidence violated his Fifth Amendment privilege against self-incrimination. Relying on Braswell v. United States, 487 U.S. 99, 108 S.Ct. 2284, 101 L.Ed.2d 98 (1988), he argues that because he produced corporate records under compulsion of a subpoena directed to him as corporate custodian, see Baltimore v. Bouknight, 493 U.S. 549, 555-56, 110 S.Ct. 900, 905-06, 107 L.Ed.2d 992 (1990) (quoting Fisher v. United States, 425 U.S. 391, 411, 96 S.Ct. 1569, 1581, 48 L.Ed.2d 39 (1976)); Bellis v. United States, 417 U.S. 85, 94 S.Ct. 2179, 40 L.Ed.2d 678 (1974); Wilson v. United States, 221 U.S. 361, 31 S.Ct. 538, 55 L.Ed. 771 (1911); Hale v. Henkel, 201 U.S. 43, 26 S.Ct. 370, 50 L.Ed. 652 (1906), the Fifth Amendment's Self-Incrimination Clause barred the government from offering evidence of his personal failure to comply adequately with the subpoena. Russell raised the objection in a motion in limine, which the district court denied by "a definitive ruling 'with no suggestion that it would reconsider the matter at trial.' " Government of V.I. v. Joseph, 964 F.2d 1380, 1385 (3d Cir.1992) (citing American Home Assur. Co. v. Sunshine Supermarket, Inc., 753 F.2d 321, 325 (3d Cir.1985)). Thus, the issue is properly before us, see United States v. Mejia-Alarcon, 995 F.2d 982, 986 (10th Cir.1993) (citing American Home, 753 F.2d at 324-25), and we exercise plenary review. See In re Grand Jury Subpoena, 957 F.2d 807, 809 (11th Cir.1992).

A. Existence of a Testimonial Privilege

"[B]ecause the act of complying with [a] government [subpoena] testifies to the existence, possession, or authenticity of the things produced," such production may implicate Fifth Amendment rights. Bouknight, 493 U.S. at 555, 110 S.Ct. at 905; Fisher, 425 U.S. at 410, 96 S.Ct. at 1580-81; Curcio v. United States, 354 U.S. 118, 125, 77 S.Ct. 1145, 1150, 1 L.Ed.2d 1225 (1957). Since a corporate custodian produces documents in his representative rather than his personal capacity, he may not invoke his right against self-incrimination in order to resist a subpoena for corporate records. 2

Page 134

Hale, 201 U.S. at 69-70, 26 S.Ct. at 376-77. Thus, in Braswell, the Court wrote that:

[T]he government concede[d], as it must, that it may make no evidentiary use of the "individual act" against the individual.... [T]he Government may not introduce into evidence ... that the subpoena was served upon and the corporation's documents were delivered by one particular individual, the custodian.... Because the jury is not told that the defendant produced the records, any nexus between the defendant and the documents results solely from the corporation's act of production and other evidence in the case.

487 U.S. at 118, 108 S.Ct. at 2295.

The government contends that Braswell does not apply here because Braswell concerned production of documents rather than their nonproduction. The distinction is without a difference. The government's concession in Braswell that it may make no evidentiary use of the "individual act" against the individual is not restricted to material actually produced but is instead broad enough to encompass the implications of production, including its incompleteness. As Justice Kennedy has noted:

An individual who produces documents may be asserting that [the documents] satisfy the general description in the subpoena, or that they were in his possession or under his control. [In either case, those] assertions can convey information about that individual's knowledge and state of mind as effectively as spoken statements....

Id. at 122, 108 S.Ct. at 2297 (Kennedy, J., dissenting) (emphasis added); see Fisher, 425 U.S. at 410, 96 S.Ct. at 1580-81; Curcio v. United States, 354 U.S. 118, 125, 77 S.Ct. 1145, 1150, 1 L.Ed.2d 1225 (1957). Thus, the testimonial aspect of production is not limited to the act of handing material over to the government--it also may include the custodian's exercise of discretion over which material to produce and which to omit. Incomplete production may therefore be as communicative as complete production.

While "[t]he act of producing documents in response to a subpoena ... has communicative aspects of its own, wholly aside from the contents of the papers produced[,] ... whether the tacit averments of the taxpayer are both 'testimonial' and 'incriminating' for purposes of applying the Fifth Amendment ... depend on the facts and circumstances of particular cases...." Braswell, 487 U.S. at 103, 108 S.Ct. at 2287 (quoting Fisher v. United States, 425 U.S. 391, 410, 96 S.Ct. 1569, 1580-81, 48 L.Ed.2d 39 (1976)). In this case, we find that the government's use at trial of evidence concerning Russell's nonproduction makes plain both its testimonial and its incriminating qualities. Cf. Fisher, 425 U.S. at 410-11, 96 S.Ct. at 1580-81 (resolving the case on the appellate record even though the determination was factual). The government introduced evidence of nonproduction not only as an overt act in furtherance of the conspiracy to evade assessment, see Superseding Indictment at 8-9, but also as testimonial evidence of a guilty mind, see Superseding Indictment at 9; Trial Tr., Mar. 12, 1996, at 142-43 (government's closing argument); Trial Tr., Mar. 1, 1996, at 82, 88 (direct testimony of investigating agent regarding receipt of corporate records and meeting with Russell); Trial Tr., Feb. 27, 1996, at 15 (government's opening statement). 3 The government's repeated reference to Russell's incomplete act of production as evidence of his culpability flies in the face of Braswell and vitiated Russell's Fifth Amendment privilege. 4

Page 135

B. Waiver

The government contends that Russell waived the Fifth Amendment privilege when he failed to claim it at the time when he produced the subpoenaed documents. See Rogers v. United States, 340 U.S. 367, 370, 71 S.Ct. 438, 440, 95 L.Ed. 344 (1951) ("The privilege is deemed waived unless invoked."). The government's argument that the privilege may be waived by making a voluntary statement is not apposite to the issue before us, which concerns the evidentiary use of a response to a subpoena for the production of documents. While the Fifth Amendment is generally not self-executing, where a testimonial act is, as in this case, compelled, the defendant does not waive the privilege by failing to invoke it. See Adams v. Maryland, 347 U.S. 179, 179-83, 74 S.Ct. 442, 444-45, 98 L.Ed. 608 (1954) (holding the Fifth Amendment self-executing where testimony was compelled by a congressional grant of use immunity).

As with congressional testimony elicited pursuant to a summons that promises use immunity, see id., a subpoena to the corporate custodian for corporate records cannot be refused. The personal privilege against being identified as the individual who complied with the subpoena is a " 'necessary concomitant' of the fact that a corporate, or government, custodian acts in a representative rather than a personal capacity." United States v. Dean, 989 F.2d 1205, 1210 (D.C.Cir.1993). 5

C. Harmless Error Analysis

The district court's erroneous admission of evidence concerning Russell's production of documents mandates reversal of his conviction unless it was "harmless beyond a reasonable...

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43 practice notes
  • United States v. Shavers, Nos. 10–2790
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • 27 Agosto 2012
    ...a reversal will result in protracted, costly, and ultimately futile proceedings in the district court.” United States v. McLaughlin, 126 F.3d 130, 135 (3d Cir.1997) (quotation marks omitted), abrogated on other grounds by United States v. Fiorelli, 133 F.3d 218 (3d Cir.1998). [693 F.3d 389]......
  • Dunn v. Colleran, No. 99-1030
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • 20 Abril 2001
    ...to consider harmless error sua sponte. See, e.g., United States v. Faulks, 201 F.3d 208, 213 (3d Cir. 2000); United States v. McLaughlin, 126 F.3d 130, 135 (3d Cir. 1997); United States v. Rose, 104 F.3d 1408, 1414 (1st Cir. 1997); Horsley v. Alabama, 45 F.3d 1486, 1492 n. 10 (11th Cir. 199......
  • U.S. v. Leggett, No. 96-7772
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • 3 Diciembre 1998
    ...actions constituted harmless error, we have discretion to apply harmless-error analysis to those actions. United States v. McLaughlin, 126 F.3d 130, 135 (3d Cir.1997), cert. denied, --- U.S. ----, 118 S.Ct. 2366, 141 L.Ed.2d 735 12 We note also that Leggett has made no claim of ineffective ......
  • In re Three Grand Jury Subpoenas Duces Tecum, Docket No. 99-1143.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • 7 Septiembre 1999
    ...Two circuit courts have recognized Braswell's inapplicability to former employees. The Third Circuit, in United States v. McLaughlin, 126 F.3d 130, 133 n. 2 (3d Cir.1997), cert. denied, ___ U.S. ___, 118 S.Ct. 2366, 141 L.Ed.2d 735 (1998), stated in dicta that "a former employee, for e......
  • Request a trial to view additional results
43 cases
  • United States v. Shavers, Nos. 10–2790
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • 27 Agosto 2012
    ...a reversal will result in protracted, costly, and ultimately futile proceedings in the district court.” United States v. McLaughlin, 126 F.3d 130, 135 (3d Cir.1997) (quotation marks omitted), abrogated on other grounds by United States v. Fiorelli, 133 F.3d 218 (3d Cir.1998). [693 F.3d 389]......
  • Dunn v. Colleran, No. 99-1030
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • 20 Abril 2001
    ...to consider harmless error sua sponte. See, e.g., United States v. Faulks, 201 F.3d 208, 213 (3d Cir. 2000); United States v. McLaughlin, 126 F.3d 130, 135 (3d Cir. 1997); United States v. Rose, 104 F.3d 1408, 1414 (1st Cir. 1997); Horsley v. Alabama, 45 F.3d 1486, 1492 n. 10 (11th Cir. 199......
  • U.S. v. Leggett, No. 96-7772
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • 3 Diciembre 1998
    ...actions constituted harmless error, we have discretion to apply harmless-error analysis to those actions. United States v. McLaughlin, 126 F.3d 130, 135 (3d Cir.1997), cert. denied, --- U.S. ----, 118 S.Ct. 2366, 141 L.Ed.2d 735 12 We note also that Leggett has made no claim of ineffective ......
  • In re Three Grand Jury Subpoenas Duces Tecum, Docket No. 99-1143.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • 7 Septiembre 1999
    ...Two circuit courts have recognized Braswell's inapplicability to former employees. The Third Circuit, in United States v. McLaughlin, 126 F.3d 130, 133 n. 2 (3d Cir.1997), cert. denied, ___ U.S. ___, 118 S.Ct. 2366, 141 L.Ed.2d 735 (1998), stated in dicta that "a former employee, for exampl......
  • Request a trial to view additional results

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