United States v. Lawson

• Decision Date: 27 April 1966
• Docket Number: No. 3-65-Cr. 60.,3-65-Cr. 60.
• Citation: 255 F. Supp. 261
• Parties: UNITED STATES of America, Plaintiff, v. John W. LAWSON, Defendant.
• Court: U.S. District Court — District of Minnesota

255 F. Supp. 261

UNITED STATES of America, Plaintiff, v. John W. LAWSON, Defendant.

No. 3-65-Cr. 60.

United States District Court D. Minnesota, Third Division.

April 27, 1966.

Sidney P. Abramson, Asst. U. S Atty., Minneapolis, Minn., for plaintiff.

Terence N. Doyle, St. Paul, Minn., for defendant.

MEMORANDUM

LARSON, District Judge.

By an Indictment returned on October 29, 1965, defendant John W. Lawson has been charged with violating 18 U.S.C. § 152 by concealing and transferring assets of the bankrupt Belmont Club, Inc., of which he was president, with intent to defeat the bankruptcy laws. It is alleged in the Indictment that a petition for an involuntary bankruptcy was filed against the Belmont Club, Inc., on June 20, 1963, which corporation was thereafter adjudicated a bankrupt on July 9, 1963.

Defendant now moves to dismiss the Indictment on the following grounds: (a) There was unnecessary delay in presenting the charges to the grand jury; (b) the Indictment, and the statute on which the charges are based, are vague and ambiguous; (c) defendant is immune from prosecution by virtue of having testified in the bankruptcy proceedings; and (d) the Indictment is based on matters about which defendant testified in a bankruptcy hearing. Ground (a) is based on Rule 48(b), Fed.R.Crim. Proc.; ground (b) on the due process clause of the Constitution; ground (c) on the immunity provision of 11 U.S.C. § 25(a) (10); and ground (d) on the last mentioned statute, as well as the constitutional privilege against self-incrimination.

Self-Incrimination—

Under the Bankruptcy Act, 11 U.S.C. § 25(a), the bankrupt is required to assist the Bankruptcy Court in a number of ways, including filing schedules of assets and liabilities; producing books and records; and testifying concerning the conduct of his business, his dealings with creditors, the nature and location of his property. Where the bankrupt is a corporation, an officer or director may be required to perform these duties, 11 U.S.C. § 25(b). Although the bankrupt's testimony concerning his estate may be compelled, 11 U.S.C. § 25(a) (10) provides that:

"* * * no testimony given by him shall be offered in evidence against him in any criminal proceeding, except such testimony as may be given by him in the hearing upon objections to his discharge."

Here we are not concerned with testimony that falls within the proviso clause, but there is involved the testimony of defendant as president of a corporate bankrupt. Defendant contends that if the transcript of his testimony was used before the grand jury, the Indictment must be dismissed.

At least two threshold questions are presented. One is whether an officer or director of a corporate bankrupt is entitled to the benefit of § 25(a) (10). There is authority, which is accepted here, that where an individual is required to perform the duties of a corporate bankrupt, the shield of § 25(a) (10) does protect him. United States v. Castellana, 349 F.2d 264, 274 (2d Cir. 1965); United States v. Weissman, 219 F.2d 837 (2d Cir. 1955); 1 Collier, Bankruptcy, Par. 7.21, p. 1020 (14th ed. 1964). A second question is whether a grand jury investigation is a "criminal proceeding." It has been so held. Stevens v. Marks, 383 U.S. 234, 86 S.Ct. 788, 15 L.Ed.2d 724 (1966); Schwimmer v. United States, 232 F.2d 855, 860 (8th Cir. 1956).

Defendant's suspicions that his testimony before the Bankruptcy Court was used in the grand jury were aroused by indications in the bankruptcy file that the Referee not only suggested an investigation by the United States Attorney's office, but also sent a transcript to that office. It has now resulted that these suspicions are not well founded. The Assistant United States Attorney originally assigned to investigate the case states by affidavit that he did not present to the grand jury any testimony relating to defendant's appearance before the Bankruptcy Court. It is also stated that none of the witnesses subpoenaed by the Government either gave testimony concerning defendant's bankruptcy appearance or had a transcript of those proceedings. An affidavit was also filed by the F.B.I. Agent who investigated the bankruptcy of the Belmont Club. Inc., and who testified before the grand jury. He, too, states that nothing regarding defendant's testimony in the bankruptcy hearing was related to the grand jury. Based upon these affidavits, defendant seems to agree that the protection of § 25(a) (10) was not violated.

However, defendant also refers to the privilege against self-incrimination, arguing that the Indictment may have been obtained in violation of that privilege. While it is not explicitly stated, defendant may be arguing that even though his testimony was not presented in evidence at the grand jury proceeding, nonetheless the privilege is violated if the Indictment is based upon information obtained as a result of his testimony. This raises the "fruit of the poisonous tree" issue, often associated with evidence obtained as a result of an illegal search and seizure or a coerced or otherwise unlawful confession. An analogous situation was presented in Jones v. United States, 342 F.2d 863 (D.C.Cir.1964). A number of opinions were written in that case, and the eleven member panel realigned for various issues. However, the majority held the confession obtained in that case was illegal and that since the accused testified before the indicting grand jury, where he affirmed the confession previously made, the District Court should determine whether other evidence, apart from the confession, was presented. If not, then the Indictment should be dismissed. More relevant to the present proceeding is the dicta. A minority of the panel took the view that where an accused is compelled to testify before the grand jury, in the absence of advice from counsel, the Indictment must be dismissed without regard to the other evidence presented. The minority judges based their opinion upon the privilege against self-incrimination and the guarantee of right to counsel.

An argument could be made in the present case that if leads were obtained from defendant's testimony before the Bankruptcy Court, which resulted in evidence presented to the grand jury, his self-incrimination privilege would be violated, requiring dismissal of the Indictment. Even if the law is moving in this direction, defendant here would not have grounds for complaint. A review of defendant's testimony discloses that he was able to recall very little concerning the assets of the bankrupt corporation. While his testimony does show that he and another corporate officer received payment for the sale of the bankrupt's property, this fact appeared in the bankruptcy file long before defendant testified. In fact, his examination was prompted by an independent discovery of this transaction. It thus seems apparent that his testimony furnished no information which could have led to evidence presented before the grand jury. Accordingly, the Indictment cannot be dismissed based on ground (d) above.

Statutory Immunity—

Defendant further contends that § 25(a) (10) grants complete immunity from prosecution to a person compelled to testify in the bankruptcy proceedings, regardless of whether his testimony is offered in evidence in a subsequent criminal proceeding. It is defendant's position that the sole purpose of this statute is to supplant the Fifth Amendment privilege.

The latter contention is answered negatively in Arndstein v. McCarthy, 254 U.S. 71, 41 S.Ct. 26, 65 L.Ed. 138 (1920), in which an involuntary bankrupt refused to answer questions in a bankruptcy hearing, claiming the privilege. He was committed to jail and sought a writ of habeas corpus, which was denied. The Supreme Court reversed, holding that § 25(a) (10) was not a substitute for the constitutional privilege. The effect of this decision is that notwithstanding the protection of § 25(a) (10), a bankrupt may still claim the privilege against self-incrimination. Herein lies the difference between the bankruptcy "immunity" and the statute involved in Albertson v. Subversive Activities Control Board, 382 U.S. 70, 86 S.Ct. 194, 15 L.Ed.2d 165 (1965), cited by defendant. There the Supreme Court reversed orders of the Board requiring petitioners to register as members of the communist party. The orders were ruled invalid since they conflicted with the Fifth Amendment privilege. The Government relied on the immunity provision of the registration statute which stated that "the fact of the registration of any person * * * shall not be received in evidence against such person in any prosecution for any alleged violation" of other sections of the Act, or any other criminal provision. Using the standards set up in Counselman v. Hitchcock, 142 U.S. 547, 12 S.Ct. 195, 35 L.Ed. 1110 (1892), the court ruled the immunity provision of the Subversive Activities Control Act of 1950, 50 U.S.C. § 783(f), did not validate the registration orders. In Counselman, it was stated that an immunity statute is valid only if it grants the witness an "absolute immunity against future prosecution for the offense to which the question relates." From this starting point, defendant maintains the bankruptcy provision must be read as granting complete immunity if it is to be constitutional. Defendant has misconceived the scope of Counselman and Albertson. These decisions suggest that the constitutional privilege must remain available unless a statutory immunity is provided which is as broad as the privilege. Where a statute forces the individual to choose between answering or being punished for invoking the privilege, without at the same time granting a complete immunity, then it becomes unconstitutional. The Supreme Court stated the rule thus in Stevens v. Marks, 383 U.S. 234, 86 S.Ct. 788, 794-795, 15 L.Ed.2d 724 (1966):

"A witness has, we think, a constitutional right to stand on the privilege against self-incrimination until it has

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