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In re Grand Jury Subpoena Issued June 18

February 1, 2010

IN RE GRAND JURY SUBPOENA ISSUED JUNE 18, 2009
ACCOUNT SERVICES CORPORATION [ASC], KJB FINANCIAL CORPORATION [KJB], APPELLANTS,
v.
UNITED STATES OF AMERICA, APPELLEE.*FN1



SYLLABUS BY THE COURT

Appeal from an order of the United States District Court for the Southern District of New York (Sullivan, J.) holding Appellants in contempt for failing to comply with a subpoena duces tecum. This appeal requires us to determine whether a corporation with a sole shareholder, officer, and employee may refuse to comply with a subpoena demanding production of corporate records under the Fifth Amendment's "act of production" privilege. We find it may not.

AFFIRMED.

Per curiam.

Argued: November 30, 2009

Before: WALKER, McLAUGHLIN, RAGGI, Circuit Judges.

Account Services Corporation and KJB Financial Corporation (collectively, "the Companies") appeal an August 17, 2009, order of the United States District Court for the Southern District of New York (Sullivan, J.) holding them in contempt for failing to comply with a subpoena for corporate records. The Companies -- which are wholly owned by Douglas Rennick, their sole shareholder, officer, and employee -- argue that they may resist the subpoena on Fifth Amendment grounds since Rennick is the only person capable of producing the records and his act of production would be testimonial and potentially self-incriminating. Although the long-established "collective entity rule" prevents corporations from availing themselves of the Fifth Amendment privilege, the Companies contend that the Supreme Court's decision in Braswell v. United States, 487 U.S. 99 (1988), compels us to carve out an exception for one-person corporations. We disagree and affirm the district court's contempt order.

BACKGROUND

On June 18, 2009, a grand jury sitting in the Southern District of New York issued a subpoena duces tecum to Account Services Corporation in connection with an investigation of alleged bank fraud, illegal gambling, and money laundering. The Government and the Companies agreed to construe the subpoena as being directed not just to Account Services Corporation, but to both of the Companies. On July 10, 2009, Rennick moved to quash the subpoena, arguing that his personal Fifth Amendment rights permitted the Companies to resist the subpoena since he was the only individual capable of producing the requested corporate records and the act of production would be testimonial and potentially self-incriminating. Judge Swain, sitting in the Southern District's emergency part, denied the motion. In re Grand Jury Subpoena Issued June 18, 2009, No. M11-189, 2009 U.S. Dist. LEXIS 71610 (S.D.N.Y. Aug. 4, 2009).

On August 5, 2009, Rennick was indicted on charges of conspiracy, bank fraud, illegal gambling, and money laundering. Subsequently, the Companies refused to comply with the subpoena, leading Judge Sullivan, who was then sitting in the emergency part, to hold them in contempt. In re Grand Jury Subpoena Issued June 18, 2009, No. M11-189 (S.D.N.Y. Aug. 17, 2009).

The Companies now appeal.

DISCUSSION

We review a finding of contempt under an abuse of discretion standard that is "more rigorous" than usual. EEOC v. Local 638, 81 F.3d 1162, 1171 (2d Cir. 1996). Abuse of discretion review "incorporates, among other things, de novo review [of the] district court['s] rulings of law." United States v. Hasan, 586 F.3d 161, 168 (2d Cir. 2009).

The Fifth Amendment guarantees that no person "shall be compelled in any criminal case to be a witness against himself." U.S. Const. amend. V. This text "limits the relevant category of compelled incriminating communications to those that are 'testimonial' in character." United States v. Hubbell, 530 U.S. 27, 34 (2000). Because the act of producing documents can be both incriminating and testimonial - such as when it confirms the documents' existence, possession, or authenticity - a subpoenaed party may be able to resist production on Fifth Amendment grounds. See United States v. Doe, 465 U.S. 605, 612-13 (1984).

Under the long-established "collective entity rule," however, corporations cannot avail themselves of the Fifth Amendment privilege. Braswell, 487 U.S. at 104-10. A corollary of this rule is that the custodian of corporate records, who acts as a representative of the corporation, cannot refuse to produce corporate records on Fifth Amendment grounds. See Bellis v. United States, 417 U.S. 85, 90 (1974). This is true (1) whether the subpoena is directed to the corporation itself or to the ...


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