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Are business papers safe from the government?
J A N E MALLOR
LEGAL HORIZONS
Are Business Papers Safe from the Government? Jane MaUor teaches business law in the School of Business at Indiana University.
57 Business papers often contain information which business people think of as highly private. Today, due to the increasing maze of governmental regulations concerning business, even conscientious businesspersons may find that they are the subjects of investigations in which their business papers are sought by the government. Are business papers protected by the Constitution from prying governmental eyes? Four recent U.S. Supreme Court cases address themselves to this question.
In early 1972, the office of the State Attorney General of Maryland began an investigation of allegedly fraudulent real estate transactions in the Washington, D.C. area. A lawyer named Andreson was implicated by the investigation. Andreson had acted as the settlement attorney for the sale of a certain lot and had allegedly made fraudulent representations to the purchaser of the lot and to a title insurance company. The prosecutors applied for and were granted a warrant to search Andreson's offices for documents pertaining to the sale of the lot. Eight of the documents seized were used at trial over Andreson's objections, including one which contained memoranda in his own handwriting. Andreson was convicted of the crimes of false pretenses and misappropriation by a fiduciary and was sentenced to two years in prison. He appealed his conviction on
JUNE 1977
Andreson
v. M a r y l a n d
44 L.W. 5127 (June 29, 1976)
JANE MALLOR
the grounds that the seizure of his business papers compelled him to be a witness against himself in violation of the Fifth Amendment. Although the Court agreed that the evidence seized was incriminating, especially since it was written in Andreson's own hand, that alone did not violate the Fifth Amendment. The Court focused on the concept of compulsion in the Fifth Amendment, and said that since Andreson was not compelled to write, but did so voluntarily, his rights were not violated. It is important to note that the Court stated that a subpoena forcing Andreson to produce the documents w o u l d have been compulsion, because he would have to aid in the discovery, production or authentication of incriminating evidence. However, a search warrant was used, and since independent government agents searched for and seized the documents without help from Andreson, his right against self-incrimination was not violated. Fisher v. United States U n i t e d States v. Kasrnir
44 L.W. 4514 (April 21, 1976) 58
United States v. Miller
44 L.W. 4528 (April 21, 1976)
In these two companion cases, Internal Revenue Service agents interviewed both taxpayers in connection with an investigation of possible criminal or civil liability under the federal tax laws. Shortly after the interviews, Fisher and Kasmir each obtained from their accountants documents relating to the preparation by the accountants of their tax returns. These documents were t h e n given to the taxpayers' attorneys for the purposes of rendering legal advice. Upon learning of the whereabouts of the papers, the IRS served subpoenas on the attorneys, directing them to produce the documents. The attorneys refused, and enforcement proceedings were brought against them. The Court agreed that if the documents would have been privileged from subpoena in the hands of the taxpayer, they would also be privileged in the hands of the taxpayer's attorney, when conveyed for the purpose of obtaining legal advice. However, these documents were not privileged. Although a subpoena served on the taxpayer to compel him to produce his accountant's worksheets involves substantial compulsion and may be incriminating, it does not compel the taxpayer's o w n testimony. According to the Court, since the taxpayers here were not compelled to restate, repeat or affirm the truth of the contents of the worksheets, the Fifth Amendment was not violated. Miller was suspected of defrauding the government of whiskey tax and carrying on the business of a distiller without paying bond. Agents from the Treasury Department caused grand jury subpoenas to be issued to Miller's banks, ordering them to produce all records of accounts maintained by Miller. The banks complied
BUSINESS HORIZONS
Legal Horizons
with the subpoenas, and allowed agents for the government to inspect and copy Miller's bank records, involving checks, deposit slips, financial statements and three monthly statements. On the basis of this evidence, Miller was convicted of several federal offenses. Miller challenged his convictions on the grounds that the subpoenas were defective, thus violating his Fourth A m e n d m e n t right to be free of unreasonable searches and seizures. The Court did not even reach the question of whether the subpoenas were defective, because it decided that Miller had no Fourth Amendment interest in the banks' records at all. The Court stated that the Fourth A m e n d m e n t applies to property in which one has a reasonable expectation of privacy, and that where such expectation exists, the government cannot search or seize unreasonably. However, since Miller voluntarily exposed all of the documents seized to the banks and their employees during the ordinary course of business, he could not claim that he had a legitimate expectation of privacy in their contents. Thus, even if the subpoenas were defective, Miller had no complaint under the Fourth Amendment.
A subpoena was served on Bellis directing him to appear before a federal grand jury and bring with him all partnership records from his former law partnership. Bellis appeared but refused to produce the partnership records, claiming that this would be compulsory self-incrimination. He was held in contempt of court, and he appealed. The Supreme Court stated that the Fifth A m e n d m e n t did not apply to records of a collective entity like a corporation or a partnership. Therefore, even if the records incriminated him personally, Bellis could not use his Fifth A m e n d m e n t privilege to refuse to produce records which he held in a representative capacity.
Bellis v. U n i t e d States
While A n d r e s o n makes it clear that, under the Fifth A m e n d m e n t , a person cannot be forced to produce his own (voluntarily made) incriminating writings by subpoena, Fisher makes it equally clear that an individual can be forced to produce the incriminating writings of another (such as an accountant), even when the documents are in the possession of the defendant or his attorney. The Supreme Court in Fisher did recognize the attorney-client privilege to the extent that an individual can feel secure from subpoena if he transfers his own writings to his attorney for the purpose of obtaining legal advice. If the documents would be
Is Any Protection Left for Business Papers?
JUNE 1977
417 U.S. 85 (1974)
59
JANE MALLOR
immune from subpoena in the individual's hands, they are also immune from subpoena in the hands of the attorney. However, all such documents can presumably be searched for and seized under a properly drawn search warrant. Bellis instructs the businessperson not to expect Fifth Amendment protection for the records of a corporation or partnership which he holds in a representative capacity. Miller teaches that a person can expect no constitutional protection for bank records kept by his bank.
Business Records in Personal Diary Form
60
However, no case has yet been presented to the Supreme Court where the business records were in personal diary form. Although the Court has stated in strong language that if there is no compulsion to write or produce incriminating evidence, admission of such evidence at trial would not violate the Fifth Amendment, but a person might still be able to claim a Fourth A m e n d m e n t privilege. Under the Fourth Amendment, private papers are protected from "unreasonable" searches and seizures. This is traditionally articulated as the requirement that the government must have probable cause to suspect someone of a crime before a search can be conducted, and that a warrant must specify what evidence is sought, in order to prevent governmental rummaging through a person's private effects. If business records are written in diary form, interspersed with personal entries and kept with one's most personal documents, it could be argued that the government would have to rummage through much nonincriminating private material in order to find incriminating evidence, thus making the search unreasonable. The four cases presented here obviously do not bode well for those who wish to withhold business papers from the government on constitutional grounds. After the 1976 term of the Court, the personal diary seems to be the last bastion of constitutional protection for business papers, and it is quite possible that even this may fall if such a case is presented.
BUSINESS HORIZONS
LEGAL HORIZONS
Are Business Papers Safe from the Government? Jane MaUor teaches business law in the School of Business at Indiana University.
57 Business papers often contain information which business people think of as highly private. Today, due to the increasing maze of governmental regulations concerning business, even conscientious businesspersons may find that they are the subjects of investigations in which their business papers are sought by the government. Are business papers protected by the Constitution from prying governmental eyes? Four recent U.S. Supreme Court cases address themselves to this question.
In early 1972, the office of the State Attorney General of Maryland began an investigation of allegedly fraudulent real estate transactions in the Washington, D.C. area. A lawyer named Andreson was implicated by the investigation. Andreson had acted as the settlement attorney for the sale of a certain lot and had allegedly made fraudulent representations to the purchaser of the lot and to a title insurance company. The prosecutors applied for and were granted a warrant to search Andreson's offices for documents pertaining to the sale of the lot. Eight of the documents seized were used at trial over Andreson's objections, including one which contained memoranda in his own handwriting. Andreson was convicted of the crimes of false pretenses and misappropriation by a fiduciary and was sentenced to two years in prison. He appealed his conviction on
JUNE 1977
Andreson
v. M a r y l a n d
44 L.W. 5127 (June 29, 1976)
JANE MALLOR
the grounds that the seizure of his business papers compelled him to be a witness against himself in violation of the Fifth Amendment. Although the Court agreed that the evidence seized was incriminating, especially since it was written in Andreson's own hand, that alone did not violate the Fifth Amendment. The Court focused on the concept of compulsion in the Fifth Amendment, and said that since Andreson was not compelled to write, but did so voluntarily, his rights were not violated. It is important to note that the Court stated that a subpoena forcing Andreson to produce the documents w o u l d have been compulsion, because he would have to aid in the discovery, production or authentication of incriminating evidence. However, a search warrant was used, and since independent government agents searched for and seized the documents without help from Andreson, his right against self-incrimination was not violated. Fisher v. United States U n i t e d States v. Kasrnir
44 L.W. 4514 (April 21, 1976) 58
United States v. Miller
44 L.W. 4528 (April 21, 1976)
In these two companion cases, Internal Revenue Service agents interviewed both taxpayers in connection with an investigation of possible criminal or civil liability under the federal tax laws. Shortly after the interviews, Fisher and Kasmir each obtained from their accountants documents relating to the preparation by the accountants of their tax returns. These documents were t h e n given to the taxpayers' attorneys for the purposes of rendering legal advice. Upon learning of the whereabouts of the papers, the IRS served subpoenas on the attorneys, directing them to produce the documents. The attorneys refused, and enforcement proceedings were brought against them. The Court agreed that if the documents would have been privileged from subpoena in the hands of the taxpayer, they would also be privileged in the hands of the taxpayer's attorney, when conveyed for the purpose of obtaining legal advice. However, these documents were not privileged. Although a subpoena served on the taxpayer to compel him to produce his accountant's worksheets involves substantial compulsion and may be incriminating, it does not compel the taxpayer's o w n testimony. According to the Court, since the taxpayers here were not compelled to restate, repeat or affirm the truth of the contents of the worksheets, the Fifth Amendment was not violated. Miller was suspected of defrauding the government of whiskey tax and carrying on the business of a distiller without paying bond. Agents from the Treasury Department caused grand jury subpoenas to be issued to Miller's banks, ordering them to produce all records of accounts maintained by Miller. The banks complied
BUSINESS HORIZONS
Legal Horizons
with the subpoenas, and allowed agents for the government to inspect and copy Miller's bank records, involving checks, deposit slips, financial statements and three monthly statements. On the basis of this evidence, Miller was convicted of several federal offenses. Miller challenged his convictions on the grounds that the subpoenas were defective, thus violating his Fourth A m e n d m e n t right to be free of unreasonable searches and seizures. The Court did not even reach the question of whether the subpoenas were defective, because it decided that Miller had no Fourth Amendment interest in the banks' records at all. The Court stated that the Fourth A m e n d m e n t applies to property in which one has a reasonable expectation of privacy, and that where such expectation exists, the government cannot search or seize unreasonably. However, since Miller voluntarily exposed all of the documents seized to the banks and their employees during the ordinary course of business, he could not claim that he had a legitimate expectation of privacy in their contents. Thus, even if the subpoenas were defective, Miller had no complaint under the Fourth Amendment.
A subpoena was served on Bellis directing him to appear before a federal grand jury and bring with him all partnership records from his former law partnership. Bellis appeared but refused to produce the partnership records, claiming that this would be compulsory self-incrimination. He was held in contempt of court, and he appealed. The Supreme Court stated that the Fifth A m e n d m e n t did not apply to records of a collective entity like a corporation or a partnership. Therefore, even if the records incriminated him personally, Bellis could not use his Fifth A m e n d m e n t privilege to refuse to produce records which he held in a representative capacity.
Bellis v. U n i t e d States
While A n d r e s o n makes it clear that, under the Fifth A m e n d m e n t , a person cannot be forced to produce his own (voluntarily made) incriminating writings by subpoena, Fisher makes it equally clear that an individual can be forced to produce the incriminating writings of another (such as an accountant), even when the documents are in the possession of the defendant or his attorney. The Supreme Court in Fisher did recognize the attorney-client privilege to the extent that an individual can feel secure from subpoena if he transfers his own writings to his attorney for the purpose of obtaining legal advice. If the documents would be
Is Any Protection Left for Business Papers?
JUNE 1977
417 U.S. 85 (1974)
59
JANE MALLOR
immune from subpoena in the individual's hands, they are also immune from subpoena in the hands of the attorney. However, all such documents can presumably be searched for and seized under a properly drawn search warrant. Bellis instructs the businessperson not to expect Fifth Amendment protection for the records of a corporation or partnership which he holds in a representative capacity. Miller teaches that a person can expect no constitutional protection for bank records kept by his bank.
Business Records in Personal Diary Form
60
However, no case has yet been presented to the Supreme Court where the business records were in personal diary form. Although the Court has stated in strong language that if there is no compulsion to write or produce incriminating evidence, admission of such evidence at trial would not violate the Fifth Amendment, but a person might still be able to claim a Fourth A m e n d m e n t privilege. Under the Fourth Amendment, private papers are protected from "unreasonable" searches and seizures. This is traditionally articulated as the requirement that the government must have probable cause to suspect someone of a crime before a search can be conducted, and that a warrant must specify what evidence is sought, in order to prevent governmental rummaging through a person's private effects. If business records are written in diary form, interspersed with personal entries and kept with one's most personal documents, it could be argued that the government would have to rummage through much nonincriminating private material in order to find incriminating evidence, thus making the search unreasonable. The four cases presented here obviously do not bode well for those who wish to withhold business papers from the government on constitutional grounds. After the 1976 term of the Court, the personal diary seems to be the last bastion of constitutional protection for business papers, and it is quite possible that even this may fall if such a case is presented.
BUSINESS HORIZONS