United States v. Silverstein

• Decision Date: 30 October 1962
• Citation: 210 F. Supp. 401
• Parties: In the Matter of UNITED STATES of America, Petitioner, v. Harry G. SILVERSTEIN, Respondent.
• Court: U.S. District Court — Southern District of New York

210 F. Supp. 401

In the Matter of UNITED STATES of America, Petitioner, v. Harry G. SILVERSTEIN, Respondent.

United States District Court S. D. New York.

October 30, 1962.

Vincent L. Broderick, U. S. Atty. for Southern Dist. of New York, for petitioner; Anthony H. Atlas, Asst. U. S. Atty., of counsel.

Corcoran, Kostelanetz, Gladstone & Lowell, New York City, for respondent; Raymond Rubin and Jules Ritholz, New York City, of counsel.

TYLER, District Judge.

The government moves for an order, pursuant to 26 U.S.C. §§ 7402(b) and 7604, directing respondent, Harry G. Silverstein, to produce the books and records set forth in an Internal Revenue summons dated May 16, 1961, served upon respondent on that day pursuant to 26 U.S.C. § 7602.

The summons, in the nature of a subpoena duces tecum and addressed to the respondent, directed him to appear on May 26, 1961, before a Special Agent of the Internal Revenue Service, and there to produce for examination specified books and records of five¹ named partnerships, of which respondent is, in all cases, a general partner.

Respondent appeared before the Special Agent as directed but there refused, and has continued to refuse, to produce the partnerships' books and records specified in the summons.

The sole ground for respondent's refusal to produce these documents is his assertion, under the Fifth Amendment to the Constitution of the United States, of the privilege against self-incrimination.² More particularly, he asserts that the Fifth Amendment forbids the use of compulsory legal process to secure these documents for examination in view of his recorded refusal to produce them with the concomitant statement by him that they may tend to incriminate him.

The government urges that the privilege does not protect respondent as to the documents here sought since they are the property, respectively, of the five named partnerships and that, under controlling case law, these partnerships are of such a nature that a general partner thereof may not assert the privilege against self-incrimination with respect to their books and records.

It is beyond substantial dispute that the privilege may, under circumstances otherwise appropriate, be asserted by one who appears before a Special Agent of the Internal Revenue Service in response to a summons issued under the authority of 26 U.S.C. § 7602. In re Turner, 309 F.2d 69 (2d Cir., 1962). The government, as heretofore indicated, while conceding that an appearance before an Internal Revenue Special Agent is not a "criminal proceeding", does not urge this point as precluding respondent from claiming his privilege.

Thus, this proceeding poses the question whether the government, under the circumstances of this case, may subpoena partnership records through a general partner, which records that partner asserts will incriminate him.

The Fifth Amendment declares, in part, "* * * nor shall any individual be compelled in any criminal case to be a witness against himself * * *." Constitution, Amend. V.

Justice Frankfurter, writing for the Supreme Court, has given concise expression to the significance of this provision of the Bill of Rights:

"Ours is the accusatorial as opposed to the inquisitorial system. Such has been the characteristic of Anglo-American criminal justice since it freed itself from practices borrowed by the Star Chamber from the Continent whereby an accused was interrogated in secret for hours on end." Watts v. Indiana, 338 U.S. 49, 54, 69 S.Ct. 1347, 1350, 93 L.Ed. 1801 (1949).³

This important principle has proved difficult to administer.⁴ The difficulty is attributable, in part, to the pragmatically required expansion of the scope of the principle beyond its literal meaning.

For example, it was early understood that in order to give effect to the Fifth Amendment, it was necessary to extend its reach to government proceedings which, not in themselves a "criminal trial", could yield the evidence to be used in such a trial. Counselman v. Hitchcock, 142 U.S. 547, 562, 12 S.Ct. 195, 35 L.Ed. 1110 (1892).

Also, the privilege was extended beyond the oral testimony of an individual to include the production by him of his personal property, which could itself "speak for" and incriminate its owner. Boyd v. United States, 116 U.S. 616, 634-635, 6 S.Ct. 524, 29 L.Ed. 746 (1886).

The latter application of the privilege has caused difficulty in judicial administration and interpretation in more than one respect. The particular difficulty inherent in the present case arises from the fact that the ownership or dominion of a given individual over given property may be shared with others or derivative in nature, and to that extent diluted.

The cases at an early stage appeared to apply a clear rule to situations where the property with respect to which the privilege was sought to be asserted belonged, in the first instance, either to a corporation or to a partnership. The rule, simply stated, was that the privilege was available to no one individual where a corporation owned the property, Wilson v. United States, 221 U.S. 361, 31 S.Ct. 538, 55 L.Ed. 771 (1911), but was available to a partner with respect to the property of the partnership. Boyd v. United States, 116 U.S. 616, 6 S.Ct. 524, 29 L.Ed. 746 (1886); United States v. Brasley, 268 F. 59 (W.D.Penn.1920).

This distinction in the older cases was based on several grounds: It was reasoned that the property of a corporation is owned by the corporation, and any control over it by individuals is exercised in a purely representative capacity; the nexus of ownership is completely lacking. Also, the state, which in fact sets down the conditions of the origin and existence of each corporation, has a great interest in regulating and controlling these frequently large and powerful entities. The public interest forbids the interposition of a purely private right between the state and its creature, the corporation. It was thought that partnerships, normatively smaller in scope, do not generally give rise to the same need for public regulation. And, more important, the property of a partnership is owned in common, personally, by each of its (general) partners. Partnership documents, therefor, were conceived to "belong to" the individual partners.

However, the Supreme Court in comparatively recent times has made clear that the proper rule is not in all cases a simple or mechanical one. United States v. White, 322 U.S. 694, 64 S.Ct. 1248, 88 L.Ed. 1542 (1944).

In the White case, the Fifth Amendment privilege was sought to be asserted by an official of a labor union with respect to records of the union. The rule stated by the Supreme Court, in reaching the decision that no privilege could be asserted by the respondent therein, expressly eschewed a mechanical approach, and set down instead a flexible test grounded on the basic principles which underlie the privilege:

"The test, rather, is whether one can fairly say under all the circumstances that a particular type of organization has a character so impersonal in the scope of its membership and activities that it cannot be said to embody or represent the purely private or personal interests of its constituents, but rather to embody their common or group interests only." White, supra, at p. 701, 64 S.Ct. at p. 1252.⁵

Since White, the lower courts have applied this "flexible test" in determining whether the personal privilege embraces documents belonging to a partnership.⁶

Two cases heavily relied upon here by the government are United States v. Onassis, 125 F.Supp. 190 (D.C.D.C.1954), and United States v. Onassis, 133 F. Supp. 327 (S.D.N.Y.1955). In both of these cases the court rejected motions to quash subpoenas duces tecum issued to a general partner of a certain partnership and requiring production of partnership records.

The partnership involved in both Onassis cases, named Simpson, Spence and Young, was composed of eight general partners and was described by Judge Youngdahl as follows:

"As stated at the outset, the firm acts as brokers for the sale, purchase and chartering of ships. It has offices in London and Glasgow as well as in New York. It acts as manager for the Texas Transport & Terminal Company, Inc., which has offices in New York, Philadelphia, Baltimore, Charleston, Savannah, New Orleans, Galveston, Corpus Christi, Houston, Dallas and Memphis. It is sufficiently organized to have Mr. Daly as comptroller and Mr. Tuffy as an accountant and a substantial number of employees working in the accounting and operations departments." (Onassis (D.C. D.C.), supra, 125 F.Supp. at p. 210.)

The district courts in each case concluded that under the test set forth in White, the privilege against self-incrimination could not be raised with respect to the books and papers of the partnership Simpson, Spence and Young.

Another case applying the test set down in White to a partnership, in which the assertion of privilege was upheld, involved a firm, "O. Casperson and Sons", composed of six general partners who had a close family relationship. Neither the nature of the business nor its scope are described in any detail in the opinion of the court. In re Subpoena Duces Tecum, 81 F.Supp. 418 (N.D.Cal.1948). The court stated that, under White, "It may be that some partnerships, which have a large number of partners, perhaps special or limited as well as general, might, as well, take on the habiliments of an association or corporation." It went on to find that "this small family partnership" did not fall within that class.⁷

Here the documents sought are books and records of five partnerships organized under the laws of New York State, in each of which respondent Harry G. Silverstein, his son, Larry A. Silverstein, and son-in-law, Bernard H. Mednik, are the only general partners. Four of the partnerships own, respectively, a unit of real estate in New York City, from which the partnership derives its name; the fifth, Medical Arts...