Forced compliance with a subpoena for foreign bank records U.S. citizens are required to maintain under the Bank Secrecy Act does not violate the Fifth Amendment privilege against self incrimination, the U.S. Court of Appeals for the Second Circuit has ruled.
Agreeing that the “required records” exception to the privilege applies, the Second Circuit affirmed a contempt order issued by Eastern District Judge Joseph Bianco (See Profile) for failure to comply with a grand jury subpoena in a Brooklyn banking investigation.
Judges Ralph Winter (See Profile), Richard Wesley (See Profile) and Susan Carney (See Profile) rejected the argument of a “John Doe” that the required records exception no longer exists and, even if it does, doesn’t apply to him in In re: Grand Jury Subpoena Dated February 2, 2012, 13-403-cv.
The regulation promulgated under the Bank Secrecy Act (BSA), Regulation 31 C.F.R. §1010.420, requires that records of foreign bank accounts, including the names of account holders, the names of the banks, the type of account and the maximum value of the account be reported to the Commissioner of Internal Revenue.
These same records were subpoenaed by the grand jury in Brooklyn, and when Doe did not comply, the government moved to compel and Bianco granted the motion.
When Doe continued to resist, Bianco held him in contempt and imposed a penalty of $1,000 per day until he complied, a penalty that was suspended pending appeal.
Writing for the court, Wesley said the Supreme Court case of Fisher v. United States, 425 U.S. 391 (1976), recognized “the Fifth Amendment privilege might protect an individual from being required to produce documents, even if the documents’ content are not protected by the privilege, when the witness’s simple act of producing the documents could be used against the witness—for example, in those cases when the simple fact that the witness possessed the documents would be incriminating.”
Twenty-four years later, in the Whitewater prosecution of Webster Hubbell, the government granted Hubbell use immunity for the act of producing some 13,120 pages of documents but not for the content of those documents.
But the Supreme Court held in United States v. Hubbell, 500 U.S. 27 (2000), that Hubbell could not be prosecuted for the content either. The court distinguished Fisher, where the “IRS knew [that the subpoenaed documents were in the hands of the taxpayers' attorneys" from Hubbell, where "It was unquestionably necessary for [Hubbell] to make extensive use of ‘the contents of his own mind’ in identifying the hundreds of documents responsive to the requests in the subpoena.”
Wesley said the privilege has evolved “to a broader prophylactic regime that, in certain circumstances, protects individuals from producing documents where they are incriminated by the contents of the documents.”
But that privilege has exceptions, including the required records exception, and, despite the argument of lawyers for Doe, Wesley said the Second Circuit has “explicitly rejected the idea that the required records exceptions has been abrogated by the act of production cases.”
In one case, In re Two Grand Jury Subpoenae Duces Tecum Dated Aug. 21, 1985, 793 F.2d 69 (2d Cir. 1986), the court upheld the required records exception over the objection of an attorney appealing a contempt order for failure to comply with subpoenas related to contingency fee arrangements.
The court in that case explained “if a person conducts an activity in which record-keeping is required by statute or rule, he may be deemed to have waived his privilege,” and “because the records must be kept by law, the record-holder ‘admits’ little in the way of control or authentication by producing them.”
Wesley then applied the three-part test laid out by the Supreme Court in Grosso v. United States, 390 U.S.62 (1968), asking first whether “the purposes of the United States inquiry” are “essentially regulatory,” second, whether “the information is to be obtained by requiring the preservation of records of a kind which the regulated party has customarily kept” and third, whether the records have assumed “public aspects” which “render them at least analogous to public documents.”
Wesley declared “the required records exception to the Fifth Amendment privilege against self-incrimination still exists” and it applies in the case at hand.
“The BSA is an otherwise-valid regulatory scheme that lawfully requires beneficiaries of foreign bank accounts to retain records containing the basic information about their accounts,” Wesley said. “This information, required by lawful statute, has the ‘public aspects’ that make it potentially subject to a grand jury subpoena in a case where a witness could assert the Fifth Amendment privilege to shield more distinctly private information.”
Robert Fink of Kostelanetz & Fink represented the defendant.
“I was very disappointed,” he said Friday. “I really thought it was actually a well-written opinion, but I think that they’re wrong. We’re now evaluating whether to ask for certiorari.”
Assistant U.S. Attorney Alexander Robbins argued for the government.
Marc Greenwald and Cleland Welton of Quinn Emanuel Urquhart & Sullivan appeared for amicus curiae, New York Council of Defense Lawyers, in support of the defense position.
“There shouldn’t be a case where the government can put somebody in the grand jury and say ‘Do you have this record we are requiring you to keep?’ and if the answer is yes, they’ve committed a crime and if the answer is no, they’ve committed a crime,” Greenwald said Friday. “It seems to be exactly what the act of production privilege is meant to prevent.”
@|Mark Hamblett can be contacted at firstname.lastname@example.org.