Opinion
19177.
Decided February 6, 2009.
The People, by Nicole M. Duvé, Esq., District Attorney, Alexander Lesyk, Esq., Chief A.D.A. of counsel.
Defendant Robert L. Pitts, by Brian Pilatzke, Esq., Public Defender.
Defendant moves to quash a grand jury subpoena duces tecum pursuant to CPLR 2304 on the ground that to require defendant to comply by turning over certain records would violate his Fifth Amendment right not to incriminate himself. As originally served, the subpoena is directed to Robert Pitts. It directs that he turn over to the Chambers of the County Court Judge (1) any and all of Robert Pitts' books, records and bank statements pertaining to the Bonnie Crary contract, and (2) any and all of "ROBERT'S RENOVATING SERVICE" books, records and bank statements pertaining to the Bonnie Crary contract.
Following oral argument on the motion to quash, the People served an amended subpoena duces tecum labeled as a Grand Jury subpoena duces tecum, seeking the same materials.
Defendant describes Fisher v. U.S., 425 US 391 as holding that the process of compelled production of voluntarily created documents does not in and of itself violate the Fifth Amendment protection against self-incrimination. In consolidated appeals from the Third and Fifth Circuits, the court held that the accountant's documents at issue in those cases were not privileged either in the hands of the lawyers or of the clients since the demanded papers were not the clients' private papers; production of the documents would involve no incriminating testimony within the protection of the Fifth Amendment. In Fisher the Supreme Court also made several other points which inform this court's consideration of the present motion to quash: (1) the U.S. Constitution protects against compelled self-incrimination, not the disclosure of private information; (2) the Fifth Amendment does not independently proscribe the compelled production of every sort of incriminating evidence, but applies only when the accused is compelled to make a testimonial communication that is incriminating; and (3) the privilege against self-incrimination protects a person only against being incriminated by his own compelled testimonial communication.
The I.R.S. served notice of possible civil or criminal liability under federal tax laws, and the clients obtained documents relating to the preparation of their tax returns by their accountants. The clients transferred the documents to their lawyers. The I.R.S. served summonses on the attorneys for production of the documents. The attorneys argued that enforcement of the summonses would involve compulsory self-incrimination of the clients, in violation of the Fifth Amendment. The clients' privilege would not be violated by enforcement of the summonses, the court held, because such enforcement could not compel the client to do anything, particularly not to be a witness against himself.
425 US at 409, other citations omitted here.
Focusing less on the content of the requested documents as constitutionally protected, defense counsel argues that the act of producing the documents, or even confirming that they exist, is testimonial in nature. Disclosure of such information, the argument goes, is therefore also violative of the Fifth Amendment. Specifically, defendant argues that producing the documents would be a compelled admission that the documents exist; that they are in defendant's possession or control, and that they are authentic. This argument rests on the Supreme Court decision in U.S. v. Doe, 465 US 605. In Doe a federal grand jury issued subpoenas to the owner of several sole proprietorships. The district court quashed the subpoenas except with respect to those documents and records required by law to be kept or disclosed to a public agency, finding that the act of producing the records would involve testimonial self-incrimination. The Third Circuit affirmed, holding that the records for which the district court quashed the subpoena were privileged, and that the act of producing them also would have "communicative aspects of its own." The Supreme Court held that where the preparation of business records is voluntary, no compulsion is present; that a subpoena for documents does not compel oral testimony and would not ordinarily compel the owner to restate, repeat or affirm the truth of the contents of the documents; and the fact that the papers on their face might incriminate the owner does not make them privileged against disclosure, because the privilege protects only against compelled testimonial communications. In Doe, the owner of the records did not contend that he prepared the documents involuntarily, and the court noted that the fact that the documents were in his possession is irrelevant to the determination of whether the creation of the records was compelled. The court therefore held that the contents of the records were not privileged. However, the Supreme Court in Doe was bound by the lower court's finding (affirmed by the Circuit court) that the act of producing the records would involve testimonial self-incrimination. Noting that the government could have compelled defendant to produce the documents in response to the subpoena, but at the cost of granting use immunity to the defendant, the court holds that it will not make a finding of constructive use immunity. Since the government did not apply to the district court to grant defendant immunity, it cannot overcome a claim of privilege under the act of production doctrine.
US v. Doe, 465 US at 610-611
So far as this court can determine, only one New York court has directly applied the Doe act of production doctrine to bar a subpoena duces tecum for personal business records of an individual, while noting that the Doe court specifically recognized an exception for records required to be maintained by law. Matter of Grand Jury Subpoena Duces Tecum Served Upon John Doe, 126 Misc 2d 1010 [Sup Ct Queens County 1984].
At oral argument of the present case, the defense also argued that the subpoena was defective in not being labeled specifically as a grand jury subpoena, and as not being returnable at a particular date, place and time. With all of the parties present in court for the argument on motion, it became amply clear what information the People were seeking, and for what purpose. The court is satisfied that, on the facts of this case, any technical defects in the subpoena were remedied by the clarifications on the record or by the subsequent revised subpoena duces tecum.
By way of informal response and by oral argument on the record on the motion return date, the People make the following arguments: authoritative cases support the People's position that records, including those required by law to be kept, are subject to grand jury subpoena and are not protected by the Fifth Amendment. See Matter of Nassau County Grand Jury Subpoena Duces Tecum , 4 NY3d 665 ; People v. Crean, 115 Misc 2d 526 [Sup Ct Westchester County 1982]; Matter of Grand Jury Subpoena Duces Tecum v. Kuriansky, 69 NY2d 232; People v. Decker, 224 AD2d 860 [3 Dept 1996]; People v. Rosano, 50 NY2d 1013; People v. Miller , 23 AD3d 699 [3 Dept 2005]; and People v. Brooks, 249 AD2d 572 [3 Dept 1998].
The theory of the People's case appears to be that a contractor (the accused) took a homeowner's money for repairs, and spent the money for purposes largely not related to the contract or the homeowner. Lien Law §§ 70 and 75 require home repair contractors to keep and maintain certain records, documenting the receipt and disbursement of such home repair contract funds. The People assert that the accused is governed by those statutory record-keeping requirements, both individually and through his solely-owned proprietorship. The People therefore do not believe that the Fifth Amendment privilege protects the accused from required disclosure of records which he is required to keep and maintain.
In the Nassau County Grand Jury case, the court held that a law firm partner could not invoke the New York Constitutional equivalent of the Fifth Amendment (Article 1, § 6) to avoid production of law firm records which were in the partner's personal possession, even though the records might also implicate him personally. The court also held that the state constitutional privilege offered no greater protection than does its federal counterpart, the Fifth Amendment.
Matter of Nassau County Grand Jury Subpoena Duces Tecum , 4 NY3d 665 , 672-673, citing Bellis v. United States, 417 US 85 [1974].
Of particular relevance in the present case, in Matter of Grand Jury Subpoena Duces Tecum, 69 NY2d 232 the court cited Shapiro v. United States, 335 US1 [1948] for the settled proposition that the Fifth Amendment privilege may not be asserted with respect to records required to be kept by law. In Shapiro, the Supreme Court cited its own earlier decision in Davis v. United States, 328 US 582, 589-90, where the court held that
Matter of Grand Jury Subpoena Duces Tecum, 69 NY2d 232, at 242 [1987]. This case involved a subpoena for records arguably covered by the physician patient privilege. While the Court of Appeals remanded for an in camera inspection as to any particularized need to protect highly sensitive information in the records claimed to be unrelated to the subject of the medicaid fraud investigation, the Court of Appeals found that neither the Fifth Amendment nor the state statutory physician-patient privilege would be violated by disclosure under subpoena.
"the physical custody of incriminating documents does not of itself protect the custodian against their compulsory production. The question still remains with respect to the nature of the documents and the capacity in which they are held. It may yet appear that they are of a character which subjects them to the scrutiny demanded and that the custodian has voluntarily assumed a duty which overrides his claim of privilege. . . . The principle applies not only to public documents in public offices, but also to records required by law to be kept in order that there may be suitable information of transactions which are the subjects of governmental regulation and the enforcement of restrictions validly established. There the privilege, which exists as to private papers, cannot be maintained." [emphasis in the Shapiro quotation from Davis]. 335 US 1, 17 [1948].
In People v. Crean, 115 Misc 2d 526 [Sup Ct Westchester County 1982], the court quashed a post-indictment trial subpoena for a disbarred attorney's books and records, on the ground that the subpoena was improperly used as an evidence-gathering discovery tool. However, the court rejected defendant's Fifth Amendment and attorney-client privilege claims on the ground that the records are required by law to be kept, and they are therefore not protected against disclosure. The court held that counsel seeking the records should have made a motion to compel discovery of the records, instead of using a subpoena.
The People's citation to People v. Decker, 224 AD2d 860 [3 Dept 1996] shows why they want the information requested here in order to proceed with a case before the grand jury. In Decker the defendant was a roofing contractor who accepted a deposit from the homeowner but never began work. The contractor was injured in an accident, but never did the agreed work or returned the money, despite a demand that he do so. The homeowner sued in local court to recover his deposit, obtained a judgment in his favor, but could not collect the money. Finally he contacted the office of the state attorney general and the police, leading to a criminal charge of grand larceny in the fourth degree. Lien Law § 71(5) provides that a trust claim arises at the moment when the parties enter into an agreement for the exchange of money and the performance of home repairs covered by the statutory provisions. Failure to pay the trust claim gives rise to an inference of misapplication of the funds, or, in Penal Law terms, a larceny.
People v. Rosano, 50 NY2d 1013 goes to the heart of the People's search for documents in the present case. Rosano deals with a major indictment of a housing development contractor who did not complete the project. Many of the charges involve the provisions of Lien Law § 79-a(3), which creates a permissible inference that a trustee's failure to keep the books or records required under § 75(4) is evidence that he received or applied the funds for purposes other than those of the trust created by operation of law when the agreement was reached. Noting that the statutory inference does not relate to criminal intent, the court found the statute constitutional. The People were still required to prove defendant's guilt beyond a reasonable doubt, and the statute did not shift the burden of proof to the defendant. The court noted that "it is beyond dispute that there exists a rational basis between the fact proved (failure to keep records) and the fact presumed (applying trust funds for a non-trust purpose). (Cf. Ulster County Ct v. Allen, 442 US 140.)" 50 NY2d 1013, 1017.
In People v. Miller , 23 AD3d 699 [3 Dept 2005] the court held that a contractor agreed to build a store, and received the full contract price at the beginning of the job. He later failed to pay numerous subcontractors, and used the money to pay bills and expenses related to other jobs. He also failed to maintain books and records as required by Lien Law § 79-a and 75. Defendant was convicted and sentenced to imprisonment and ordered to pay restitution. The appellate court held that defendant's larcenous intent or his intent to defraud were established by legally sufficient evidence. Presumably the People cite the case here in order to show that the theory of prosecution is recognized under prevailing precedents. To similar effect, the People also cite People v. Brooks, 249 AD2d 572 [3 Dept 1998]. This court notes that People v. Melino , 52 AD3d 1054 [3 Dept 2008] reaches similar conclusions as to the sufficiency of the evidence and proof of criminal intent in particular.
For purposes of the Lien Law trust provisions, a trustee is required to keep records containing the name and address of each person from whom the trustee has a right to receive funds, with a statement sufficient to identify the contract or other transaction by reason of which such moneys will become payable; the amount of each payment or advance that has become due or payable and the date on which it became due or payable; the name and address of each person to whom the trustee has incurred an obligation constituting a trust claim, whether or not it is then due, with sufficient information to identify the contract or transaction out of which the claim rises; the amount of each claim that has become due, earned or otherwise payable and the date when that occurred; the name and address of each person from whom the trustee received funds, with identifying information, together with the name of any bank or depositary where the finds are deposited. Lien Law § 75(3). Subdivision 4 of that section, as previously noted, provides that failure to the trustee to keep the books or records required "shall be presumptive evidence that the trustee has applied or consented to the application of trust funds actually received by him as money or an instrument for the payment of money for purposes other than a purpose of the trust as specified in section 71 [of the Lien Law]. § 76 provides that after 30 days following a trust claim becoming payable, any beneficiary of a trust claim is entitled, on request to examine the books or records of the trustee with respect to the trust, and to make copies of any part relating to the trust, or at the beneficiary's option, to receive a verified statement setting forth the entries with respect to the trust contained in such books or records.
Lien Law § 79-a(1) provides that any trustee of a trust arising under [these provisions] who applies or consents to the application of funds received by the trustee for a purpose other than the trust purposes is guilty of larceny and punishable as provided in the Penal Law. Subdivision 3, as previously noted, provides that failure to keep and maintain the books and records required to be kept pursuant to § 75 shall be presumptive evidence that the trustee used or applied the funds for a purpose other than a trust purpose.
General Business Law §§ 770 defining terms used in Article 36 relating to home improvement contracts, leads to a conclusion that those provisions do apply to the type of contract at issue here.
Among the records sought through the subpoena in the present case are bank records of accounts in the name of either the accused personally or of his solely-owned proprietorship, pertaining to the particular contract. The court notes that strong argument can be made that bank statements, even in the possession of the accused, are the property not of the accused but of the bank. A request for disclosure of those documents would therefore not trigger the Fifth Amendment privilege. See Matter of Usher v. Chase Manhattan Bank, N.A., 53 AD2d 542 [1 Dept 1976], citing US v. Miller, 425 US 435, where the court held that an accused has no Fourth Amendment objection to government access to the bank records.
Since the records sought by subpoena are not presently before the court, no firm determination can be made to establish that they are indeed records of a kind required to be maintained by law. Nor does the court need to make such a determination. Grand jury subpoenas are presumed valid, and the burden is on the party seeking to quash a subpoena duces tecum to show that the records would have no conceivable relevance to the investigation at hand. Virag v. Hynes, 54 NY2d 437; St. Francis Hospital-Poughkeepsie v. Spitzer, 284 AD2d 629 [3 Dept 2001]. No such showing has been made in the present case.
This court is not aware of any decision by which a court has applied the act of production Fifth Amendment privilege to forbid use of a subpoena to obtain records in the hands of the accused, when the records are ones required to be maintained by law. The facts brought forward by the parties at this point indicate that the records requested are required to be maintained by law, and some of them may not even be the private records of the accused, notwithstanding that they are in his possession, and that he may think of them as containing private information. The subpoena duces tecum does not on its face require testimony from the accused. Under these circumstances the court finds that the motion to quash the subpoena must be denied. So ordered.