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UNITED STATES v. COYNE

January 14, 1977

UNITED STATES of America, Plaintiff,
v.
Howard COYNE, Defendant



The opinion of the court was delivered by: CURTIN

CURTIN, Chief Judge.

 The defendant in this case has been charged in a thirteen-count indictment. Counts I through VI of the indictment charge the defendant with substantive violations of Title 18, United States Code, Section 152, in that he defrauded creditors by unlawfully transferring and concealing property of the Sleep Shops Corporation, the bankrupt. Counts VII through XII charge the defendant with knowingly and fraudulently making a false oath as to a material matter in the bankruptcy proceeding in the filing of various schedules relating to it, also in violation of § 152. Count XIII charges the defendant with conspiracy in violation of the same section.

 Defendant has moved, pursuant to a claimed grant of immunity under 11 U.S.C. § 25(a)(10) [Bankruptcy Act of 1970, § 7(a)(10)], to suppress the use of his testimony given at the first meeting of creditors. Previously, the defendant moved to dismiss the indictment on the grounds that the Government had improperly used this same testimony in presenting evidence to the grand jury. This motion was denied on November 6, 1974.

 The statutory language upon which the defendant relies reads, in pertinent part, as follows:

 
(a) The bankrupt shall . . .
 
(10) at the first meeting of his creditors, at the hearing upon objections, if any, to his discharge and at such other times as the court shall order, submit to an examination concerning the conducting of his business, the cause of his bankruptcy, his dealings with his creditors and other persons, the amount, kind, and whereabouts of his property, and, in addition, all matters which may affect the administration and settlement of his estate or the granting of his discharge; but no testimony, or any evidence which is directly or indirectly derived from such 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:
 
. . .
 
(b) Where the bankrupt is a corporation, its officers, the members of its board of directors or trustees or of other similar controlling bodies, its stockholders or members, or such of them as may be designated by the court, shall perform the duties imposed upon the bankrupt by this title.
 
11 U.S.C. § 25(a), (b). (Emphasis added).

 The defendant contends that this statutory grant of immunity is automatic and that the Government has the burden of establishing that it made no use or derivative use of the testimony in question. There is support for the proposition that § 25(a)(10) provides an automatic immunity grant. See Keeney & Serino, The Effect of the Organized Crime Control Act of 1970 in Bankruptcy Proceedings, 46 Am.Bankr.L.J. 1, 10 (Jan. 1972), in which the authors state:

 
Under the bankruptcy immunity the bankrupt receives an automatic grant for any testimony (and leads) given by him at a hearing which he was directed to attend. There is no prerequisite, to the conferring of immunity, that a claim be made by the witness that the answer will tend to incriminate and a refusal to answer on that basis. (Emphasis in original). *fn1"

 In this case, however, we are dealing not only with § 25(a)(10), but with subsection (b) as well. Prior to 1938, it was unclear whether a corporate officer could claim the protection of (a)10. In that year, the Congress amended the statute by adding (b), thus clearing up part of the confusion. See United States v. Castellana, 349 F.2d 264, 273 (2d Cir. 1965), cert. denied, 383 U.S. 928, 86 S. Ct. 935, 15 L. Ed. 2d 847 (1966). The remaining uncertainty, which is critical to a determination in this case, is the meaning of the word "designated" in subsection (b).

 The Second Circuit, in Castellana, stated:

 
As we read the cases, a meaningful distinction, rooted in the statutory language, should be drawn between the corporate officer who testifies voluntarily, and thus cannot claim the privilege, and the one who, having been directed to appear by the bankruptcy court, has thereby been "designated by ...

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