United States v. Invader Oil Corporation
5 F.2d 715
S.D. Cal.
1925
Check Treatment
JAMES, District Judge.

Subpoenas duces tecum were heretofore issued by the clerk of this court, requiring the respondents named in the above title to appear before the grand jury in session at the present term and produce their records. All of the respondents except Owenwood Pool No. 3 are resident in the state of Oklahoma. Owenwood Pool No. 3 is a resident of the state of Texas. Respondents have appeared and moved, to quash the subpoenas. This particular form of attack is not so expressed in the сase of the Oklahoma respondents, but the name given it is not important. The objections mainly urged have to do with constitutional rights, of respondents as they are reserved in the Eоurth and Eifth Amendments;

In terms the subpoenas are broad enough to require the production of all of the records having to do with the business of respondents. The demand is, without question, as rеspondents’ counsel have termed it, “most broad and sweeping.” As to whether, in view of the facts as presented by the government, that demand so exceeds the limits of propеr investigation as to amount to unreasonable search, may be first considered. That question is always a judicial, one. The government has shown, by affidavits of post office inspеctors, that matters were reported which, gave notice to the department to which they belong that probable violations of the postal laws had been committеd by reason of fraudulent practices of the management in control of all respondent organizations; that searches and examination of the records of the Oklаhoma organizations and of that at Port Worth, Tex., had been partially made, the most of it by force of a subpoena issued out of the federal courts and stipulations follоwing the issuance thereof; that the entire number of respondents were constituted under one general control, represented by the corporate organizations named and the Owenwood Oil Corporation of Texas; that the syndicates and the pool referred to were subsidiaries; that a complete ‍​​​‌‌‌‌‌‌‌‌​‌‌​​‌​‌‌‌‌‌​​‌​​​‌‌​‌​​​​​‌​​‌‌‌‌‌​​‍examination of all of the rеcords of the organizations was not permitted to be had, and that the inspectors and auditors were obstructed in their efforts to obtain access , to all of such recоrds, some of them being withheld because of the claim, technically made, that they were not designated in the subpoena; that the subpoenas both in Texas and Oklahoma were finally vacated at the instance of the government; that, having elected to bring such prosecutions as the evidence to be developed might warrant in the District Court of the Southern District of California, the subpoenas were caused to be issued here. The fact further is claimed, and the affidavits tend to so show it, that the transactions of the respоndent corporate organizations are so intermingled and concerned with the operations of the subsidiaries that the true, conditions respecting the alleged fraudulent transactions are not reflected by the records of such corporate organizations. No effectual denial is submitted as to the facts just summarized; and even though that mаtter stood upon a conflict in the showing as between the government and respondents, the conflict would not be here resolved, so as to interfere with the proper invеstigation and prosecution of offenses under the criminal statutes.

It is the duty of the grand jury to make investigations, where that arm of the government charged with the duty of conducting criminal рrosecutions presents evidence to it under the belief, based upon reasonable grounds, that the criminal laws have been violated. Necessarily it is the grand jury that is acting, аnd a subpoena can only have the effect of requiring the production before that body of witnesses and documents. There is no authority in the court to direct that exhibits be dеlivered to investigators,, although *717 the grand jury, having before it a witness suitably qualified, may cause such witness to make his examination and report the facts; all the while the custody of the records so produced ‍​​​‌‌‌‌‌‌‌‌​‌‌​​‌​‌‌‌‌‌​​‌​​​‌‌​‌​​​​​‌​​‌‌‌‌‌​​‍being that of the grand jury. Being apprised fully of its rights and duties, it will be assumed here that the grand jury will not act other than as the law prescribes and permits. <

That the grand jury has not entered upon the investigation of some particular and specific charge affords no reason for holding that a subpoena requiring a witness to give testimony genеrally in behalf of the government should be quashed. Wilson v. U. S., 221 U. S. 361, 31 S. Ct. 538, 55 L. Ed. 771, Ann. Cas. 1912D, 558. In Wheeler v. U. S., 226 U. S. 478, 33 S. Ct. 158, 57 L. Ed. 309, the court considered a case where the subpoena called for “all the cashbooks, ledgers, journals, ‍​​​‌‌‌‌‌‌‌‌​‌‌​​‌​‌‌‌‌‌​​‌​​​‌‌​‌​​​​​‌​​‌‌‌‌‌​​‍and other books of account * * *, and all copies of letters and telegrams of Wheeler & Shaw, Incorporated.” The grand jury was there investigating whether Wheeler and Shaw had, by means of the corporation, used the mails to defraud. The claim that the subpoena was too broad, and that Wheeler, if required to produce the books and documents, would be denied his constitutional right not to furnish evidence against himself under compulsion, was rejected.

In Norcross v. U. S., 209 F. 13, 126 C. C. A. 155 (9th Cir.), contentions almost identical with those here were made under similar facts. Amоng the objections urged was one now emphasized — that the documents were wanted primarily ‍​​​‌‌‌‌‌‌‌‌​‌‌​​‌​‌‌‌‌‌​​‌​​​‌‌​‌​​​​​‌​​‌‌‌‌‌​​‍for examination by postal inspectors and not by the grand jury. The court held that the rеspondent was properly adjudged in contempt for refusing to obey the subpoena.

In the Wilson Case, 221 U. S. 361, 31 S. Ct. 538, 55 L. Ed. 771, Ann. Cas. 1912D, 558, the right of an individual not to be compelled to give evidence implicating him in a criminal act was fully recognized, but it was pointed out that the production of books of a corporation by an individual in his representative capacity as an officеr constituted no invasion of that right. The witness would be compelled to produce the records, but could stop short of giving any oral testimony as to entries made by him, or other acts in connection therewith, which might show his own crime. The court tested the question by declaring: “But 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”- — cited also in Essgee v. U. S., 262 U. S. 151, 43 S. Ct. 514, 67 L. Ed. 917.

And the particular form of the organization, as being incorporated or not, seems to furnish no reason for extending the privilege of the record keeper. It is claimed that the syndicates named and Owenwood Pool No. 3 are trust organizations of a private nature; It fairly appears that these trusts have share interests (whether so called or not) which arе offered as investment opportunities to the public. Except that a single trustee is vested with great powers, and is made practically immune from any right in the investors to have his disposition of their property questioned during a term of 20 years, the organizations are in their nature commercial associations. The trust instrument does concede the right, which the law would compel in any event, to the investors to examine the records. As such associations, subsidiary to and operated apparently under the controlling genius of thе companies corporate, it ought not to be considered that these records are beyond the reach of compulsory examination by the grand jury.

I am of the оpinion that the command of the subpoenas should be obeyed. Under the oral evidence heard, and the matters shown by affidavit, all of the records called for may be rеasonably necessary in order to enable the jury, or its experts, to uncover the suspected fraudulent acts. In that case the demand is not too sweeping. Erom what has bеen said, it also follows that no right of any of the respondents, secured to them by the Fifth Amendment, will be infringed.

The motion to quash the subpoenas, on all of the grounds stated, is overruled. Re-' sрondents are required to be and appear before the grand jury in the Federal Building in Los Angeles at the session of said jury to be held on May 1, 1925, there to render obedience to the subpoenas in all things as required, with leave, nevertheless, to apply for a. modification of this order, in the event that a binding stipulation is entered into, assuring to the government a full inspection and examination of all of the books and records required to be produced, at the places where such records are kept. All legal exceptions are allowed to this order.