Court: Court of Appeals for the Second Circuit; December 18, 2013; Federal Appellate Court
John Doe appeals a contempt order and a directive to comply with a grand jury subpoena from the United States District Court for the Eastern District of New York regarding his foreign bank accounts, which are subject to the Bank Secrecy Act (BSA). The subpoena requests specific records that Doe is legally required to maintain. Doe argues that complying would violate his Fifth Amendment right against self-incrimination. The district court determined that the documents sought are "required records," which are exempt from Fifth Amendment protections due to their compliance with legitimate governmental regulatory interests. Doe asserts that the "required records" doctrine is obsolete and inapplicable to his situation, but the court disagreed and upheld the district court's ruling. The subpoena sought details such as account holders' names, banks, account numbers, account types, and maximum account values—all information mandated by law to be reported to the IRS. After Doe's non-compliance, the government successfully moved to compel him to produce the documents, leading to a contempt ruling and a daily sanction of $1,000, suspended pending appeal. The court concluded that the documents in question fall under the "required records" exception to the Fifth Amendment, allowing the government to demand their production.
The Act of Production Privilege under the Fifth Amendment protects individuals from being compelled to produce documents if doing so could incriminate them, even if the documents' contents themselves are not protected. This principle was established in Fisher v. United States, where the Supreme Court ruled that the act of producing documents in response to a subpoena conveys information about their existence and the witness's possession, which can be incriminating. In Fisher, the Court determined that the incrimination stemmed solely from the content of the documents, not their existence, and thus the privilege did not apply.
The decision referenced Boyd v. United States, which emphasized privacy interests under the Fourth Amendment but did not effectively harmonize with Fifth Amendment protections against self-incrimination. Fisher shifted the legal understanding of the privilege away from Boyd’s framework.
In United States v. Hubbell, the Court further developed the act of production privilege. Hubbell was initially resistant to subpoenas, asserting his Fifth Amendment rights, but was granted use immunity for the act of production. The Court concluded that the content of the documents produced could not be used against him due to the testimonial nature of his efforts in identifying and producing them.
Documents in the prosecutor's office were obtained only after the respondent asserted his constitutional privilege, received immunity, and complied with a District Court order to identify potentially incriminating evidence. The Court distinguished this case from Fisher, where the IRS was aware of the documents' location, and from Hubbell, where the government lacked prior knowledge of the documents that were ultimately produced. The respondent had to rely heavily on his memory to identify the documents in response to the subpoena. Consequently, the government was prohibited from using the contents of these records, leading to the dismissal of the indictment. The privilege has expanded to protect individuals from self-incrimination while allowing grand juries to seek the truth. Doe contends that absent an exception, the act of production privilege shields him from complying with the grand jury's subpoena.
The act of production privilege includes exceptions, notably the required records doctrine established in Shapiro v. United States, which permits the government to compel the production of certain documents mandated by law, even if this would otherwise violate the Fifth Amendment. In Shapiro, a wholesaler was subpoenaed for invoices required to be maintained under the Emergency Price Control Act. Despite recognizing constitutional limits on governmental record-keeping requirements, the Court upheld the compelled disclosure of the un-immunized documents.
The Court established a three-factor test for determining "required records": 1) the inquiry must serve a regulatory purpose; 2) the information must come from records the regulated party routinely maintains; and 3) the records must have public characteristics, resembling public documents. In Grosso v. United States, the Court found this exception inapplicable in a case involving illegal gambling. Marchetti v. United States reinforced this, as the Court upheld Marchetti's Fifth Amendment privilege against disclosing his illegal gambling activities, arguing that the records were not customary for him and lacked public aspects, given they pertained to individuals engaged in criminal conduct. Consequently, his conviction was overturned.
Further, Doe and an amicus argued that the required records doctrine is no longer valid or applies only in exigent circumstances, citing its roots in wartime cases like Shapiro and Boyd v. United States. However, past precedents consistently uphold the doctrine as an exception to the Fifth Amendment privilege, regardless of exigent circumstances, as seen in Baltimore City Dep’t of Social Servs. v. Bouknight and other cases. The Court has explicitly rejected claims that the required records exception was abrogated by act of production cases. In particular, the case involving a psychiatrist required to produce subpoenaed records demonstrates the continued application of this doctrine.
The document addresses the constitutional limits on the government's power to compel record-keeping related to patient files, emphasizing a strong correlation between New York's law requiring these records and the government's purpose in seeking their production. It clarifies that the "required records" doctrine serves as an exception to the Fifth Amendment privilege, overriding it when applicable. The court rejected the notion that the privilege recognized in *Fisher* protects state-required records, asserting that *Fisher* did not challenge the required records exception.
Further, an attorney's appeal against a contempt order for failing to comply with subpoenas concerning contingency fee arrangements was dismissed, as the court found the requested documents fell under the required records exception. The attorney's argument claiming the invalidation of this exception following *United States v. Doe* was also rejected, with the court noting that *Doe* did not pertain to required records. The rationale for this exception includes the waiver of privilege when record-keeping is mandated by law, and the minimal admission of control by the record-holder upon production.
The court reaffirmed the required records exception's relevance in Fifth Amendment jurisprudence, citing its application in *Rajah v. Mukasey* regarding information from immigrants following the September 11 attacks, where the Fifth Amendment did not shield mandatory records from use in deportation proceedings. Several circuits have upheld the application of the required records exception in similar cases, and the court concurs with these rulings.
The "essentially regulatory" test determines whether a record requirement is fundamentally regulatory and thus avoids infringing on the Fifth Amendment privilege. Legislation aimed at a specific group suspected of criminal activity is less likely to be considered regulatory. Courts tend to reject the required records exception when the legislation targets a narrow population involved in criminally-permeated areas, such as illegal gambling or marijuana sales. Conversely, the exception is applied in situations like drivers in accidents or custodians of state-supervised children.
In *California v. Byers*, the Supreme Court analyzed a statute that, although applicable only to those involved in accidents, was deemed relevant to all drivers, highlighting the lawful nature of driving. Similarly, in *United States v. Dichne*, a reporting requirement under the Bank Secrecy Act (BSA) was upheld despite its potential for self-incrimination, as the act of transporting large sums of cash is not illegal. The court emphasized the need to balance state interests against individual rights, noting that invalidation of reporting requirements typically occurs when individuals must disclose information that incriminates them for the very conduct they are reporting. In cases involving transportation of cash, this does not equate to the requirements placed on gamblers or marijuana users, who would disclose activities that are inherently prosecutable.
The excerpt addresses the regulatory nature of the Bank Secrecy Act (BSA) concerning record-keeping requirements for foreign bank accounts. It clarifies that the inquiry focuses not on the overall motivations behind the BSA, but on whether the specific regulation, 31 C.F.R. 1010.420, is "essentially regulatory" or primarily aimed at criminal activity. It emphasizes that owning a foreign bank account is not inherently illegal and that account owners are not "inherently suspect." Although the BSA mentions "criminal investigations" as part of its purpose, it also supports civil and intelligence efforts unrelated to crime. The excerpt acknowledges that while some legislative history may suggest a criminal focus, the Supreme Court has previously rejected arguments characterizing the BSA solely as criminal. The determination lies in whether the BSA’s requirements disproportionately target criminal activity, which the courts have found not to be the case. Ultimately, the document concludes that the BSA’s record-keeping requirements, although related to both criminal and civil matters, maintain their status as "essentially regulatory."
Doe contends that the reliance on Dichne and similar cases regarding ex post challenges to statutory reporting requirements is not applicable to individual claims of the privilege against self-incrimination. While recognizing the distinction between these challenges, the Supreme Court's precedent necessitates an examination of the purposes behind the regulatory framework mandating record-keeping, as discussed in Dichne. In line with Shapiro, where the privilege was asserted in response to a subpoena, the Fifth Amendment does not obstruct the enforcement of a valid civil regulatory scheme. The fact that the records sought could support criminal prosecution does not alter the regulatory nature of the inquiry, which remains unchanged in this context.
The Bank Secrecy Act (BSA) requirement under 31 C.F.R. 1010.420 is characterized as "essentially regulatory." The second prong of the Grosso test stipulates that the information must be derived from records that the regulated party typically maintains. Doe fails to cite any cases where records were deemed non-customarily kept. The required records are fundamental, including the account holder's name, account designation, foreign bank information, account type, and maximum account value. The district court justified that these records are "customarily kept" based on another BSA section mandating similar reporting to the IRS. Doe challenges this reasoning as circular, suggesting it allows Congress to create a custom through legal requirements. However, the subpoena seeks basic information that is inherently kept by account beneficiaries, as they need it to access their accounts. Common sense dictates that beneficiaries maintain such records for practical purposes, including assessing account balances before significant purchases and understanding their financial standing, regardless of their wealth.
Doe posits that while there is a general presumption that bank account owners are aware of their funds' locations, individuals engaging in illicit activities may intentionally avoid keeping such records. However, the Bank Secrecy Act (BSA) encompasses all foreign bank account holders, not just wrongdoers. The discussion shifts to the "public aspects" prong, which examines whether required records possess qualities that make them comparable to public documents. The parties disagree on the interpretation of this test, which may have diminished legal relevance since its inception in 1948. Doe suggests that records have "public aspects" if they are crucial to regulatory schemes that promote public welfare, respond to emergencies, or are routinely submitted to regulatory bodies. While Doe cites authorities supporting this view, the document indicates that these criteria are not mandatory for establishing public aspects. The Government's interest in private information does not inherently render it public, nor does formal statutory demand. Court precedents such as Marchetti clarify that records mandated by valid regulatory frameworks have public aspects and are not protected as private under the Fourth or Fifth Amendments. Therefore, compelled personal information under an established regulatory scheme assumes a public characteristic. The distinction lies between information required by law and that which is not; the latter cannot be deemed public through a flawed statute. Doe's assertion that the exception applies only where substantive restrictions exist is rejected, affirming that Congress can require records without imposing additional limitations on the activity itself. It suffices that Congress may prohibit an activity to justify its recordkeeping demands.
The Bank Secrecy Act (BSA) mandates that beneficiaries of foreign bank accounts retain specific records as outlined in 31 C.F.R. 1010.420. These records are deemed to have "public aspects," making them subject to grand jury subpoenas, even if a witness claims the Fifth Amendment privilege regarding more private information. The "required records" exception to the privilege applies here, countering Doe's arguments that such records can only be compelled if the record keeper sought a government benefit, thus waiving their Fifth Amendment rights. Doe contends that ignorance of the BSA’s requirements means beneficiaries cannot waive their rights unintentionally, but this is refuted on two grounds: the Supreme Court's indication that a waiver does not need to be "knowing" or "intelligent," and the fact that the Fifth Amendment does not apply if the act of producing records does not risk self-incrimination. Since the BSA penalizes only a knowing and willful failure to maintain records, a truly unaware account owner would not face criminal penalties for admitting negligence in recordkeeping. The court reinforces that individuals engaging in regulated activities must be aware that maintaining records for regulatory inspection is a requirement. Doe's argument that immunity is necessary for the government to obtain his records is rejected; the required records exception allows for such production without immunity. Consequently, the district court's imposition of sanctions for Doe's noncompliance with the subpoena is affirmed. The subpoena specifically requested records that must be maintained under the BSA related to foreign financial accounts over the past five years, detailing information such as account names, numbers, and maximum values during the reporting period. The legal discourse surrounding the implications of Fisher and Boyd on constitutional protections remains complex, with scholarly agreement that the Court sought to preserve similar protections without relying on Boyd’s reasoning.
