Attorney and were granted access to all the items. Decl. of Miller, at PP 7, 8, 10 and Exhs. A, C. Notwithstanding this access, the commitments they made to provide the accountings, and the Order of this Court, only defendants Sehn and Tolosa visited the District Attorney's office to view the seized documents on March 19, 1992, one month after the accountings were due. See id. at PP 9, 13 and Exhs. B, E.
Donner argues that he should not be held in contempt since he has endeavored to obtain records necessary to prepare a complete accounting from the District Attorney, but that he has been informed by Assistant District Attorney Miller that the records are not presently available for his review. Donner Aff., dated May 14, 1992. A party may defend against a contempt by showing that compliance with the order is "factually impossible." See United States v. Rylander, 460 U.S. 752, 757, 75 L. Ed. 2d 521, 103 S. Ct. 1548 (1983). The defendant has a burden of production when raising this defense which "may be difficult to meet." Badgley, 800 F.2d at 36. As noted by the Second Circuit in Badgley, "[a] classic application of the factual impossibility defense arises when a court orders an individual to produce documents that are not in his possession or control." 800 F.2d at 37 (citing Rylander, supra; Falstaff Brewing Corp. v. Miller Brewing Co., 702 F.2d 770, 781 (9th Cir. 1983)).
Donner's argument that it is "factually impossible" for him to comply with this Court's Order of February 14, 1992 is not convincing. His claim that the records necessary to complete the accounting are not available for his review is directly contradicted by the sworn statement of Assistant District Attorney Miller that the defendants have had access to the records since November 22, 1991. Moreover, Donner's asserted inability to comply with the Order lacks sufficient detail to permit the Court to assess the veracity of that claim -- nowhere does Donner identify what records he needs to provide the accounting, the specific efforts he has made to obtain the records, and when they will be available. Moreover, absent from his April 27 affidavit is any disclosure, pursuant to the second part of the accounting, with regard to the disposition of the $ 14,100 he apparently withdrew from his bank account on February 7, 1992, the day after his assets were frozen. See Feinberg Decl., dated April 17, 1992, at P 21, and Exh. 6. Certainly, he is in no need of outside assistance to gather that information.
The remaining defendants, rather than suggesting that they have diligently attempted to comply with the Order, refuse to do so on the grounds that the information they have agreed to provide may be used against them in a criminal trial. Thus, they have attempted to invoke their Fifth Amendment privilege against self-incrimination at this time.
"It has long been established, of course, that the Fifth Amendment privilege against compulsory self-incrimination protects an individual from compelled production of his personal papers and effects as well as compelled oral testimony." Bellis v. United States, 417 U.S. 85, 87, 40 L. Ed. 2d 678, 94 S. Ct. 2179 (1974) (citations omitted). That privilege, however, does not extend to artificial entities, such as corporations. See, e.g., Braswell v. United States, 487 U.S. 99, 102, 101 L. Ed. 2d 98, 108 S. Ct. 2284 (1988). Despite this lack of privilege, Oxford Capital and Oxford Consolidated have refused to comply with the Court's order because "the corporate officers are concerned that their signature upon such an accounting affidavit will be used by the District Attorney's Office to establish their use of the corporation as corrupt criminal enterprises." Lipman Decl. at P 6. In effect, the corporate officers assert their own claim of privilege to prevent the corporations from producing. This they cannot do.
In Braswell, the Supreme Court held that a corporate custodian may not resist a subpoena for corporate records on the ground that his act of production would incriminate him in violation of the Fifth Amendment. 487 U.S. at 113. In so holding, the Court reiterated the observation it had previously made in Bellis that "'in view of the inescapable fact that an artificial entity can only act to produce its records through its individual officers or agents, recognition of the individual's claim of privilege with respect to the financial records of the organization would substantially undermine the unchallenged rule that the organization itself is not entitled to claim any Fifth Amendment privilege, and largely frustrate legitimate governmental regulation of such organizations.'" Braswell, 487 U.S. at 116 (quoting Bellis, 417 U.S. at 90). Accordingly, the Court found that "any claim of Fifth Amendment privilege asserted by the agent would be tantamount to a claim of privilege by the corporation -- which of course possesses no such privilege." Braswell, 487 U.S. at 110; see United States v. Kordel, 397 U.S. 1, 8, 25 L. Ed. 2d 1, 90 S. Ct. 763 (1970) (corporation cannot avoid responding to interrogatories based on an individual's assertion of his Fifth Amendment privilege -- "service of the interrogatories obliged the corporation to 'appoint an agent who could without fear of self-incrimination, furnish such requested information as was available to the corporation.'" (citations omitted)).
Such a rule does not leave the individual unprotected against prosecution -- since the act of production is in the custodian's representative capacity instead of his individual capacity, "the Government . . . may make no evidentiary use of the 'individual act' against the individual." Braswell, 487 U.S. at 117-18. Thus, Braswell requires that the signing of the accountings on behalf of Oxford Capital and Oxford Consolidated not be used against the corporate officers as individuals. Accordingly, Oxford Capital and Oxford Consolidated must comply fully with the terms of the Order and cannot hide behind the Fifth Amendment privilege of their officers.
Sehn's, Forson's, and Tolosa's position is equally unavailing. Although it is true that the individual defendants have a Fifth Amendment right to assert, by freely agreeing to the Consent Judgments, these defendants have waived their privilege. Defendants cannot raise a Fifth Amendment defense to production for the first time in a contempt proceeding. Cf. United States v. Kirksey, 631 F. Supp. 165, 169-70 (S.D.N.Y. 1986) (defendant waived Fifth Amendment privilege and could not oppose on those grounds the summons enforcement order to which he had consented where he had been afforded "ample opportunity" to assert that defense); United States v. Fein, No. M-18-304, 1985 WL 254 (S.D.N.Y. Feb. 6, 1985) (defendant could not assert Fifth Amendment privilege at contempt proceeding where he failed to raise that defense at the enforcement hearing). Allowing defendants in the instant action to assert the privilege at this stage would be giving them the option to ignore the Judgments entered against them until such time as they could no longer escape the imposition of sanctions. See Fein, 1985 WL 254, at *1.
The individual defendants were fully aware of the District Attorney's criminal investigation, and even asserted their Fifth Amendment privilege in response to questions posed by the Commission in December 1991. Feinberg Decl., dated May 5, 1992, at PP 2,3. Despite having invoked their rights previously, they freely consented to the entry of the Judgments, knowing that the information could be of interest to law enforcement personnel.
The Judgments were the product of negotiation -- defendants could have sought to condition their execution of the Judgments upon an agreement by the Commission to insert a provision preserving their Fifth Amendment privileges. See New York v. Salem Sanitary Carting Corp., 1989 U.S. Dist. LEXIS 16354 at *9, *10 (E.D.N.Y. Nov. 26, 1989) ("no individual shall be deemed to have waived his Fifth Amendment privilege against self-incrimination as a result of consenting to the entry of this Order, final Judgment and Consent Decree"). Of course, the Commission may not have agreed to such a condition, but defendants would then have had the option of refusing to execute the Judgments.
In sum, the Court concludes that the elements of civil contempt are satisfied as to each of the defendants in this action. Sanctions, however, will not be imposed at this time, and defendants will be permitted 45 days in which to purge themselves of the contempt by complying with the terms of this Court's Order, dated February 14, 1992. Should defendants fail to comply within the given time period, the Court will impose appropriate sanctions against them.
For the foregoing reasons, the Commission's motion for an order holding defendants in contempt of this Court's February 14, 1992 Order is granted.
Dated: New York, New York
May 21, 1992
William C. Conner
United States District Judge