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March 1, 1984

In Re Grand Jury Subpoenas Addressed to DAVID J. HEUWETTER, MICHAEL J. SAVAGE, ESQ., and FORSTER & KADISH, ESQS.

The opinion of the court was delivered by: TENNEY


David Heuwetter ("Heuwetter") is the target of a grand jury that has been empanelled to investigate charges of securities and tax law violations.In August 1983 grand jury subpoenas were served on Heuwetter and his attorneys -- Michael D. Savage, Esq. ("Savage"), and Forster and Kadish, Esqs. ("Forster & Kadish") -- commanding them to produce the records of several business entities controlled by Heuwetter and the records of various financial transactions involving Heuwetter. Each party has moved for an order to quash pursuant to Federal Rule of Criminal Procedure ("Rule") 17. They assert that the documents requested are protected either by Heuwetter's fifth amendment privilege against self-discrimination or by the attorney-client privilege. Each party has also moved for an order pursuant to Rule 17 to intervene in the motions to quash.

 The motions to intervene are granted. For the reasons stated below, Heuwetter's motion to quash is denied, subject to the outlined modifications. The attorneys' motions to quash are denied in part and granted in part, subject to the outlined modifications. Further, the Court reserves decision on the remaining portions of the motions until after the documents specified below have been reviewed in camera.


 A grand jury empanelled in the Southern District of New York is investigating the collapse of Drysdale Securities Corporation ("DSC") to determine whether any federal securities or tax laws have been violated. Heuwetter has been associated with DSC since 1976, and was in charge of its government securities and municipal bond trading operations. In February 1982 Heuwetter and Joseph E. Ossorio, the chairman of the board of DSC, incorporated Drysdale Government Securities, Inc. ("DGSI") for the purpose of accommodating Heuwetter's government trading activities. Heuwetter is the only stockholder of DGSI. Heuwetter's relationship with DSC, however, did not end, and he remained head of its trading desk at 61 Broadway, New York. On May 17, 1982 Heuwetter publicly announced that DSC could not pay approximately $160 million of interest due and owing to bankers and other entities that had loaned money to Heuwetter and DSC.

 Subsequently, after a grand jury investigation was commenced, subpoenas were issued to Heuwetter and two of his attorneys, Savage and Forster & Kadish. Savage, who is a member of the firm of Gersten Savage & Kaplowitz, has been Heuwetter's tax attorney for a number of years and, in addition, has represented him and a few of his companies in a number of corporate matters and in at least one litigation. Forster & Kadish have represented Heuwetter on a wide variety of matters.

 The Heuwetter subpoena *fn1" requires him to produce the records of sixteen corporations and partnerships *fn2" that he has been associated with, including the records of "all predecessor, successor, affiliated and subsidiary entities and divisions of each." Savage and Forster & Kadish received similar subpoenas *fn3" except that, in addition, their subpoenas request the production of documents belonging to Heuwetter and his sole proprietorship, Fixed Income Government Securities ("FIGS"). Each subpoena also requests a list of all documents being withheld under a claim of privilege. To date only Forster & Kadish have produced such a list.


 A. Heuwetter's motion to quash on the ground of fifth amendment privilege

 Recognizing that a long line of cases hold that records or documents of a corporation or partnership are not protected by an individual's fifth amendment privilege aginst self-incrimination see, e.g, Bellis v. United States, 417 U.S. 85, 40 L. Ed. 2d 678, 94 S. Ct. 2179 (1974); Curcio v. United States, 354 U.S. 118, 1 L. Ed. 2d 1225, 77 S. Ct. 1145 (1957); United States v. Sullivan, 332 U.S. 689, 68 S. Ct. 331, 92 L. Ed. 297 (1944); Wilson v. United States, 221 U.S. 361, 55 L. Ed. 771, 31 S. Ct. 538 (1911), Heuwetter does not argue that the contents of the documents are protected by his fifth amendment privilege. Instead, he contends that the documents the Government seeks are shielded by the "act of production" doctrine.This doctrine, which under certain circumstances brings corporate and partnership documents back within the ambit of an individual's fifth amendment privilege, was recently confirmed by the Court in Fisher v. United States, 425 U.S. 391, 48 L. Ed. 2d 39, 96 S. Ct. 1569 (1976). In Fisher, a tax evasion case, the subpoena required the production of an accountant's work papers, which were in the hands of the client's attorney. The Court noted that the mere act of producing decumentary evidence has communicative aspects that can amount to compulsory self-incrimination because "[c]ompliance with the subpoena tacitly concedes the existence of the papers demanded and their possession or control by the taxpayer. It also would indicate the taxpayer's belief that the papers are those described in the subpoena." Id. at 410 (citation omittted). As the second circuit recently explained, under the act of production doctrine compliance with a subpoena duces tecum can amount to incriminatory testimony in violation of an individual's fifth amendment right in two situations:

 (1) if the existence and location of the subpoenaed papers are unknown to the government, then the [individual's] compelled production of those documents "tacitly concedes the existence of the papers demanded and their possession or control by the [individual]," . . . and (2) where the [individual's] production of documents may "implicitly authenticate" the documents and in so doing provide a link in the chain of incrimination.

 United States v. Fox, 721 F.2d 32, 36 (2d Cir. 1983) (citations omitted). The Fisher Court, however, held that the documents in that case were not protected by Fisher's fifth amendment privilege. The Court noted that the accountant's work papers unquestionably existed and were in his attorney's possession, and that the production of them would not authenticate the documents because they had been drafted by a third party. 425 U.S. at 412-13.

 In this circuit, the act of production doctrine was applied by the court in In re Katz, 623 F.2d 122 (2d Cir. 1980). In that case a subpoena duces tecum had been served on an attorney requiring the production of documents in his possession relating to named and unnamed corporations allegedly owned by his client. The court observed that the "very production under compulsion may be testimonial and incriminating communication." Id. at 126. Significantly, in its analysis the court noted that the Government clearly did not know the identity of some of the corporations. Thus, the court found that for these entities "the "existence and location of the papers' is not a "foregone conclusion," and their production may well add much "to the sum total of the Government's information." Id. (quoting Fisher, supra, 425 U.S. at 411. See also United States v. Fox, supra. The Katz case was remanded to the district court for factual findings.

 More recently, the court in In re Grand Jury Subpoenas Duces Tecum Dated June 13, 1983 and June 22, 1983, 722 F.2d 981 (2d Cir. 1983), held that a former corporate president, who had absconded with some corporate documents upon leaving the corporation's employment, had gained personal possession of the documents and could invoke the act of production doctrine. The court noted that "[t]he Fisher doctrine simply does not turn on either content or authorship of the documents; it is the fact, and the circumstances, of possession that are controlling." Id. at 987 (citation omitted) (emphasis in original). The court remanded the case for a determination ...

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