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UNITED STATES v. HALLSIMS INDUS. COMPONENTS

December 16, 1987

United States of America
v.
Hallsims Industrial Components, Ronald G. Sims and Edward Hall



The opinion of the court was delivered by: LORD

 Lord, S.J.

 The Inspector General of the Department of Defense filed a complaint to enforce a subpoena duces tecum. For the reasons that follow, defendant Hallsims will be ordered to comply with the subpoena.

 I.

 On August 31, 1978 the Inspector General served a subpoena duces tecum addressed to the "Custodian of Records, Hallsims Industrial Components, Inc.," and a subpoena duces tecum addressed to the "Custodian of Records, Hallsims Industrial Components, a Partnership." *fn1" The subpoenae seek records relating to contract # DLA 500-84-C-1962 between Hallsims and the Department of Defense, and had a return date of September 10, 1987. The return date passed without response. At a show cause hearing, individual defendants Ronald G. Sims ("Sims") and Edward Hall ("Hall"), through counsel, asserted that they are the custodians of the subpoenaed records, and that the act of producing these documents would tend to incriminate them. After the hearing, the parties unsuccessfully attempted to reach agreement on a stipulation stating that the act of producing certain identified documents requested in the subpoena *fn2" would tend to incriminate Sims and Hall. Sims and Hall now request leave to file ex parte affidavits in support of their claims that they are the de facto custodians of the documents and that the act of production would tend to incriminate. The government, apparently having conceded that the act of production of at least some of the requested documents would tend to incriminate, seeks an order requiring the corporation to appoint a new custodian to comply with the subpoena. Defendants argue that it is improper to order the corporation to appoint a new agent, and that such an order would "force the de facto custodians to do in the presence of the designated agent what they cannot be compelled to do in the presence of the federal agent . . . make communications and the act of production."

 II.

 In this circuit, the custodian of corporate records may assert a personal fifth amendment right if the act of production itself would provide testimonial evidence tending to incriminate him. In re Grand Jury Matter (Brown), 768 F.2d 525 (3d Cir. 1985). *fn3" Thus, Hall and Sims, as corporate custodians, may be able to invoke successfully a personal fifth amendment defense to enforcement of the subpoena. However, this does not answer the question whether the corporation may be ordered to appoint another custodian.

 Although no controlling precedent is directly on point, review of several recent Third Circuit cases suggests that it is not improper to order the corporation to appoint an agent to produce the documents.

 In United States v. Municipal Bond & Coll. Services, 810 F.2d 46 (3d Cir. 1987), the IRS issued a summons to appellant's "Custodian of Records," in connection with an investigation of the company's president, Prusan. Prusan was the custodian, and received use immunity. On appeal, the corporation challenged the district court's failure to accord Prusan derivative immunity. The court noted that several individuals other than Prusan could have produced the documents, id. at 48, that the corporation could not assert Prusan's constitutional rights, id. at 49, and that the corporation had no fifth amendment rights of its own to assert against the granting of immunity to Prusan. Id. at 49. Notwithstanding any rights Prusan might have, the court concluded that the corporation "has no right to refuse examination of the documents demanded by the subpoena." Id. at 48.

 In United States v. Rogers Transp., Inc., 793 F.2d 557 (3d Cir. 1986), the district court ordered the corporation to produce records in response to a subpoena. The corporation was permitted to choose any representative it wished to produce such records, but did not produce the documents. At a contempt hearing, the special counsel employed by the corporation to locate the records and comply with the subpoena stated that the corporation's president and sole stockholder, Rogers, refused to speak with or otherwise assist special counsel. Special counsel was advised that Rogers would invoke his fifth amendment privilege. No other employee knew where the records were. The corporation argued that it did all it could to comply with the subpoena, and should not be held in contempt.

 The court rejected this argument. "Any other determination in these circumstances would dilute the firmly established principle that the self-incrimination defense is not available to a corporation, even a so-called one person corporation." Rogers, 793 F.2d at 558. Accepting the corporation's argument would mean that "the corporation's obligation to obey such a court order turns on the whim of its principal executive." Id. Rogers rejects the notion that the custodian's fifth amendment rights can shield the corporation from complying with the subpoena.

 The distinction between serving a subpoena on an unnamed custodian, as opposed to a named individual, was highlighted in Matter of Special Federal Grand Jury, 819 F.2d 56 (3d Cir. 1987). In that case, the court noted

 
The district court ordered appellant [an individual] to produce the documents sought. Compare United States v. Municipal Bond & Coll. Services, Inc., 810 F.2d 46, 48-49 (3d Cir. 1987), and United States v. Rogers Transp., Inc., 793 F.2d 557, 558 (3d Cir. 1986), in which corporations were ordered to comply with subpoenas that permitted any representative of the corporation to produce the records sought. Nothing that we say today forecloses the government from pursuing that approach. Nor is it foreclosed from pursuing its earlier suggestion in this case that another agent be appointed to produce the records.

 Id., 819 F.2d at 57 n.1 (emphasis in original). There is no intimation that it is improper to order the corporation to appoint a ...


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