A PERSON CANNOT BE COMPELLED TO CREATE OR PARTICIPATE IN A FINANCIAL
ACCOUNTING WHEN THEY CLAIM THE FIFTH AMENDMENT PRIVILEGE AGAINST
SELF-INCRIMINATION
Julie Vianale/August 14, 2015
Sometimes as part of a civil enforcement action, the Government will ask the court
for injunctive relief to compel corporate officers to provide a financial accounting for their
company. This typically happens when the Government alleges a Ponzi scheme of some
kind. The Government wants the corporate representative to create a document – financial
statements of some kind – that explains where the company’s money or other assets came
from, and where they all went.
But when a corporate representative personally creates such an accounting, Fifth
Amendment concerns arise. In giving or even participating in a corporate accounting,
corporate officers and employees risk giving evidence against themselves which the
Government will then use against them in a parallel or later-brought criminal prosecution.
The Fifth Amendment, however, prohibits the Government from obtaining a courtordered accounting over a valid and timely assertion of the privilege against compelled
self-incrimination.
The Fifth Amendment and its Scope
The Fifth Amendment guarantees that no person “shall be compelled in any criminal
case to be a witness against himself.” U.S. Const. amend. V. The privilege may be asserted
“where the witness has reasonable cause to apprehend danger from a direct answer,”
Hoffman v. U.S., 341 U.S. 479, 486 (1951), and may be invoked “in any proceeding, civil or
criminal, administrative or judicial, investigatory or adjudicatory.” Kastigar v. U.S., 406 U.S.
441, 445 (1972).
An individual is entitled to assert the Fifth Amendment privilege when he or she can
show: “(1) compulsion, (2) a testimonial communication or act, and (3) incrimination.”
United States v. Doe (In re Grand Jury Subpoena Duces Tecum), 670 F.3d 1335, 1341 (11th
Cir. 2012) (citing United States v. Ghidoni, 732 F.3d 814, 816 (11th Cir. 1984) (citing United
States v. Authement, 607 F.2d 1129, 1131 (5th Cir. 1979)).
The privilege also protects the production of personal documents. Grand Jury
Subpoena Dated April 9, 1996 (FGJ 96-02) v. Smith, 87 F.3d 1198, 1200 (11th Cir. 1996). The
act of producing documents alone can be sufficiently testimonial to trigger Fifth
Amendment protection. See United States v. Hubbell, 530 U.S. 27, 36-37 (2000); In re Grand
Jury Subpoena, 670 U.S. at 1342 (citing Fisher v. United States, 425 U.S. 391, 410 (1976)
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(“The act of producing evidence in response to a subpoena nevertheless has
communicative aspects of its own, wholly aside from the contents of the papers
produced.”)). i
Waiver of the Fifth Amendment Privilege
Once claimed, a waiver of the privilege “is not lightly to be inferred.” Emspak v. U.S.,
349 U.S. 190, 196 (1950); Smith v. U.S., 337 U.S. 137, 150 (1949), and the court “must
indulge every presumption against waiver of fundamental constitutional rights.” Emspack
at 198. See U.S. v. St. John, 2013 U.S. Dist. LEXIS 14117 at *10 (M.D. Fla. Jan. 31, 2013);
Gebhardt v. Saunders (In re Saunders), 2015 Bankr. LEXIS 1329 at *11 (N.D. Ga. Bankr. Ct
April 3, 2015).
In Klein v. Harris, the Second Circuit adopted a now widely-used two-prong test to
analyze whether a person has waived their Fifth Amendment privilege:
[A] court should only infer a waiver of the fifth amendment’s privilege
against self-incrimination from a witness’ prior statements if (1) the witness’
prior statements have created a significant likelihood that the finder of fact
will be left with and prone to rely on a distorted view of the truth, and (2) the
witness had reason to know that his prior statements would be interpreted
as a waiver of the fifth amendment’s privilege against self-incrimination.
Klein v. Harris, 667 F.2d 274, 287 (2d Cir. 1981).
The first prong of the Klein test – avoiding distortion – may only be found in
compelling circumstances, namely, where a witness testifies under oath on a particular
subject matter, and then invokes the privilege to avoid cross-examination into the subjects
of his or her testimony. Id. at 288. With respect to the second prong, a witness only waives
the privilege if his or her prior statements were both “testimonial” and “incriminating.” Id.
Statements are testimonial, “only if the witness’ prior statements … were voluntarily made
under oath in the context of the same proceeding.” Id. See Gebhardt, 2015 Bankr. LEXIS
1329 at *11 (“A testimonial waiver occurs when a party voluntarily under oath in the same
proceeding provides incriminating facts.”) (citing Rogers v. U.S., 340 U.S. 367, 373-74
(1951)).
The Klein waiver test has been used repeatedly in Florida federal courts, see In re
Scarfia, 104 B.R. 462, 464 (M.D. Fla. Bankr. 1989), and is consistent with the Eleventh
Circuit’s decision in U.S. v. White, 846 F.2d 678, 690 (11th Cir. 1988). White considered
whether a person’s civil deposition could be used against them in a later criminal trial, and
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held that “[a] witness who testifies at any proceeding, instead of asserting his Fifth
Amendment rights, loses the privilege.” Id. (citing Minnesota v. Murphy, 465 U.S. 420, 427
(1983); Garner v. U.S., 424 U.S. 648, 654-55 (1976)). See In re Scarfia, 104 B.R. at 464
(“While the concept associated with Klein has not been considered by the Eleventh Circuit
Court of Appeals, this Court notes the underlying policy appears to be the same as
announced by the Eleventh Circuit in White.”); Gebhardt v. Saunders, 2015 Bankr. LEXIS
1329 at *12 (applying Klein’s two-prong test to waiver challenge).
Preparing a Corporate Accounting Can Be Incriminating
To establish that one’s statements would be incriminating, a person need only show
that he or she is the subject of a pending criminal investigation that’s related to conduct
alleged in the Government’s civil complaint.
When a person prepares an accounting for filing with the court or for the
Government’s use, its creation would be testimonial in nature and incriminating. An act or
statement is “testimonial” if it requires the privilege holder to “use the contents of his mind
to incriminate himself or lead[s] the Government to evidence that would incriminate him if
he complied with the district court’s order.” U.S. v. Doe (In re Grand Jury Subpoena Duces
Tecum), 670 F.3d 1335, 1349 (11th Cir. 2012). In creating a financial accounting, a
corporate officer or employee must necessarily use the “contents of his or her own mind.”
The accounting can be used by the Government against the individual directly, or
derivatively, to lead to other evidence against him or her. Such an accounting is therefore
protected by the Fifth Amendment. Doe, 670 F.3d at 1345.
Only Individuals, not Companies, Possess a Fifth Amendment Privilege
Although corporate defendants do not have a Fifth Amendment privilege, the
individual officers, directors, employees, general partners and agents of those corporations
surely do. They cannot be personally required to create an accounting for their company
over their Fifth Amendment objection.
The Reaction of the Courts
Both the Supreme Court and federal appellate courts, including the Eleventh Circuit,
have held that a corporate officer cannot be compelled in his corporate capacity to provide
testimony, or the equivalent of testimony, that is self-incriminating.
In U.S. v. Kordel, 397 U.S. 1 (1970), the Supreme Court held a corporate officer was
not required to answer interrogatories on behalf of the corporation if the responses would
incriminate him. “Without question [the officer] could have invoked his Fifth Amendment
privilege against compulsory self-incrimination.” 397 U.S. at 7. Service of the
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interrogatories obliged the corporation to appoint an agent who could without fear of selfincrimination furnish whatever responsive information the corporation had. Id. If there
was no such person, the Court assumed a protective order would be warranted under Rule
26, postponing civil discovery until the criminal case was over. Id.
In Curcio v. U.S., 354 U.S. 118 (1957), the Supreme Court held that, when a corporate
officer stated in response to a document subpoena for corporate records that he did not
have the records, he could not be compelled to testify about the location of the records or
to identify who had possession of them.
On similar facts, and quoting Curcio, the Eleventh Circuit stated, “[t]he government
has no right to compel a person to speak the contents of her mind when doing so would
incriminate that person. To do so would be ‘contrary to the spirit and letter of the Fifth
Amendment.’” Grand Jury Subpoena dated April 9, 1996 (FGJ 96-02) v. Smith, 87 F.3d 1198,
1201 (11th Cir. 1996).
In SEC v. Dunlap, the Fourth Circuit sustained Tracy Dunlap’s invocation of the Fifth
Amendment to bar his personal preparation of an accounting for both himself and the two
companies he controlled. SEC v. Dunlap, 253 F.3d 768, 770, 772, 774, 776, 778 n. 15 (4th
Cir. 2001). The trial court had issued injunction and contempt orders requiring Dunlap
to “testify and produce documents in his personal capacity – as well as on behalf of [his
companies,] Elfindepan and Southern Financial.” Id. at 774-775. On appeal, the Fourth
Circuit reversed in part, holding that because the trial court orders required Dunlap “to
create and produce a sworn accounting regarding his personal financial transactions and
assets, those orders implicate his Fifth Amendment protections.” Id. at 774. The Fourth
Circuit held that, “[b]ecause, as even the SEC recognizes, Dunlap possesses a valid Fifth
Amendment privilege against production and testimony in his personal capacity,” the
contempt order had to be modified and vacated to give effect to Dunlap’s privilege. Id. at
775.
With respect to the accounting for the corporations, Dunlap was cited for contempt
for refusing to “cause” Southern Financial to produce the ordered accounting. Id. at 776.
The Fourth Circuit held that, in light of Dunlap’s personal Fifth Amendment privilege, the
trial court could only require Dunlap “to take appropriate actions within his authority to
ensure Southern Financial’s compliance with the Injunction Order and the Contempt
Order.” Id. Consistent with the Fifth Amendment, Dunlap himself could only be lawfully
ordered to “secure” an accounting by and on behalf of Southern Financial, id. at 778 n.15, or
to “command” others to provide it. Id. at 776. He was not, and could not be, compelled to
prepare the accounting personally.
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In CFTC v. Garcia, Case No. 15-cv-237-FtM-38CM, 2015 U.S. Dist. LEXIS 69957 (M. D.
Fla. May 29, 2015), an action defended by this author, the District Court confirmed that a
corporate officer cannot be compelled to personally give or participate in an accounting for
his companies over his Fifth Amendment objection. Id. at *12-*15.
In Garcia, the CFTC sought to compel the defendant to create a detailed account of
all of his companies’ “assets and liabilities, electronic devices, and funds … received from
and paid to others in connection with commodity futures or forex transactions ….” Id. at
*15. The District Court held that such an accounting, however, was “undoubtedly
testimonial in nature,” and thus “triggered” defendant’s Fifth Amendment privilege. Id. at
*13. The Government had made clear that it would only accept an accounting from the
defendant corporate officer himself, not some other third party. Id. at *18. The accounting
would thus require the defendant himself “to evaluate all of the corporate documents
produced and essentially create a new document not only summarizing those documents,
but also using the contents of his own mind to communicate other facts requested by the
accounting.” Id. at *13.
In addition, the District Court found there was no waiver of the Fifth Amendment
privilege merely because the corporate officer had produced documents on behalf of his
companies to comply with an earlier court order. The District Court held that the corporate
officer had complied “in his role as corporate representative of the Corporate Defendants. “
Id. at *17. He had no choice but to comply with the order or face being held in contempt.
Id. Under these circumstances and faced with such an choice, compliance with the court’s
earlier production order did not constitute a waiver of the Fifth Amendment. Id.
(discussing In re Grand Jury Subpoena Dated April 9, 1996 v. Smith, 87 F.3d 1198, 1201 (11th
Cir. 1996)).
Please Note: Information contained in this alert is for the general education and knowledge of our
readers. It is not legal advice and should not be relied upon as such. It is not designed to be, and should
not be used as, the sole source of information when analyzing and resolving a problem. Moreover, the
laws of each jurisdiction are different and are constantly changing. If you have specific questions
regarding a particular fact situation, we urge you to consult competent legal counsel.
In summarizing the principles laid down in two key cases from the Supreme Court on whether an
act of production is testimonial – Hubbell and Fisher – the Eleventh Circuit concluded that “an act of
production can be testimonial when that act conveys some explicit or implicit statement of fact that certain
materials exist, are in the subpoenaed individual’s possession or control, or are authentic.” In re Grand Jury
Subpoena, 670 F.3d at 1345. The Eleventh Circuit stated that “[t]he touchstone of whether an act of
production is testimonial is whether the government compels the individual to use ‘the contents of his own
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mind’ to explicitly or implicitly communicate some statement of fact.” Id. (citing Curcio v. U.S., 354 U.S. 118
(1957)).
In In re Grand Jury Subpoena, the Eleventh Circuit concluded that a witness’ decryption and
production of the contents of the hard drives of his computer would constitute a testimonial act of production
protected by the Fifth Amendment. 670 F.3d at 1346. The Court concluded decryption and production of the
hard drives would “require the use and contents of Doe’s mind and could not be fairly characterized as a
physical act that would be nontestimonial in nature.” Id. According to the Court, the decryption and
production “would be tantamount to testimony by Doe of his knowledge of the existence and location of
potentially incriminating files; of his possession, control, and access to the encrypted portions of the drives;
and of his capacity to decrypt the files.” Id.
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