The government uses grand jury subpoenas both for the production of documents and records and for potential testimony. Subpoenas are typically served on individuals and businesses during an investigation. The documents produced by such subpoenas are often presented to a grand jury as evidence in support of an indictment being sought by the prosecutor.
Being served a grand jury subpoena requiring the production of records can feel ominous, or at the very least, create enormous anxiety on the recipient. Surely, it rases many questions and uncertainty. Does the subpoena signal that there is a criminal case underway? Why are these documents being subpoenaed? Will the documents requested disclose wrongdoing?
The prospect that the documents will in some way help prove that the holder is guilty of a crime, is of course, the biggest fear. Likewise, some professionals must be concerned as to whether turning over records relating to a client or patient may violate an ethical duty?
For these reasons, it is better to consult an attorney who is experienced in grand jury practice even if the request for production appears routine or otherwise innocuous.
The scope and specifics of the subpoena requires analysis. Important questions that need to be asked include:
The privilege against self-incrimination is the right to remain silent and decline to testify or otherwise respond to questions, in those circumstances when there is reasonable cause to believe that the statements could result in prosecution for one or more crimes. This privilege also extends to the act of producing the records if there is a testimonial aspect to the production. There are, of course, some preliminary questions.
Individuals and the owners of sole proprietorships are entitled to the privilege, and this includes a privilege in the act of production as discussed below. For example, in United States v. Doe, 465 U.S. 605 (1984), the owner of sole proprietorships moved to quash subpoenas demanding production of certain business records of several of his companies. He was the subject of a federal grand jury investigation of alleged corruption in the awarding of county and municipal contracts. The Court ultimately ruled in his favor, reasoning that the records of a sole proprietorship are no different from the individual owner’s personal records, and the turning over of the subpoenaed documents to the grand jury would admit their existence and authenticity. “Accordingly, respondent was entitled to assert his Fifth Amendment privilege rather than produce the subpoenaed documents.”
Corporate shareholders, officials or employees in their official capacity as custodians of collective entities, however, do not have the privilege. The reason that the owners of sole proprietorships rather than single member corporations hold the privilege is that the owner of a sole proprietorship acts in a personal rather than a representative capacity when responding to a subpoena. Therefore, the custodian of records for incorporated businesses and limited liability corporations cannot assert the privilege.
In United States v. Braswell case, 487 U.S. 99 (1988), the corporation was incorporated by the petitioner. His wife and mother were also directors. The Court found that “… representatives of a collective entity act as agents, and the official records of the organization that are held by them in a representative rather than a personal capacity cannot be the subject of their personal privilege against self-incrimination, even though production of the papers might tend to incriminate them personally.”
The Braswell opinion did, however, include a footnote. The court specified that they “leave open the question whether the agency rationale supports compelling a custodian to produce corporate records when the custodian is able to establish, by showing for example that he is the sole employee and officer of the corporation, that the jury would inevitably conclude that he produced the records.” Still, not much has changed since that footnote in that courts have declined to extend the privilege to corporate officers even if they are the sole shareholder.
For example, in the case of In re Twelve Grand Jury Subpoenas 908 F3d 525 (9th Cir. 2018), subpoenas were issued to the custodian of records of various entities in which the custodian held the only interest, and had been the subject of an ongoing grand jury investigation of crimes, including obstruction of justice, tax evasion, and bankruptcy fraud. He refused to produce the requested documents on the ground that he was either the sole shareholder, officer, or member of the entities, and that because he was the individual responsible for accounting and document preparation for those entities, the compelled production of the documents would incriminate him personally.
The Ninth Circuit rejected his arguments and referred to the footnote in Braswell. The Court specifically considered that by choosing to operate his businesses as a corporation or LLC and not as a sole proprietorship, he knowingly sought out the benefits of these forms. “Having done so, he cannot now be shielded from its costs.” The Ninth Circuit declined to find that the custodian could refuse to obey the subpoena under these circumstances.
Even a medical doctor who was the sole shareholder of a medical practice, could not rely on the privilege. In Re: In the Matter of the Grand Jury Empaneled on May 9, 2014, 786 F.3d 255 (3rd. Cir. 2015) The only medical practitioner in his practice, Doe organized his medical practice as ABC Entity, a “professional association,” a type of corporation doctors may form under New Jersey law. Doe had operated his practice through the corporate entity and at some point, in time, had employed a staff of six. The subpoena required Doe’s corporation to produce potentially incriminating information. At the time of the appeal of the order of contempt for refusing to comply with the subpoena, ABC no longer had any employees, but contracted for operation of the practice, including maintenance of medical records.
The doctor argued that as a sole practitioner in a corporation with no other employees, he alone had control over the content and location of business records and so a jury would inevitably conclude that was the source of the incriminating documents. The Third Circuit upheld the order of contempt, rejecting his arguments. “..it is not the size or the type of corporation that matters. Rather, as the Supreme Court has explained, to determine whether an individual is entitled to invoke his or her Fifth Amendment privilege, courts must determine whether the entity in question is an established institutional identity independent of its individual partners.”