High Court Curbs Rights to Withhold Records

In two decisions that will significantly help the government prosecute white-collar crimes, the Supreme Court ruled Wednesday that a criminal suspect may be compelled to turn over records on his foreign bank accounts and documents on family-owned corporations.

In both cases, the high court rejected the argument that such forced disclosures violate the Fifth Amendment’s ban on forced self-incrimination.

Government attorneys said that the rulings will provide a major boost in the prosecution of such crimes as tax evasion, drug dealing, stock fraud and insider trading in which those involved often funnel assets through foreign bank accounts and personally held corporations.

The ruling on corporate records also may aid investigators in the Iran-Contra case. For more than a year, they have been seeking records from the U.S. corporations run by defendants Richard V. Secord and Albert A. Hakim.

Walsh to Cite Ruling

A spokesman for independent counsel Lawrence E. Walsh said that his office will cite the ruling in renewed efforts to get those records but that they are not crucial to the case because of the wealth of other documentary evidence already obtained.

Funds in the Iran arms sale operation also were kept in Swiss bank accounts, but those bank records already have been obtained through an agreement between U.S. and Swiss officials, the spokesman said.

Bank accounts in nations with strict bank secrecy laws long have been an attractive haven for wealthy tax evaders and international business operators who wanted to avoid the scrutiny of U.S. investigators.

Recent agreements between the United States and several nations including Switzerland have helped prosecutors in some criminal cases gain information on previously secret accounts. But Swiss officials still generally will not turn over records on complaints involving U.S. tax evasion or insider trading in stocks, since those are not crimes in Switzerland, according to Kurt Hoechner, legal counselor for the Swiss Embassy.

8-1 Vote

On an 8-1 vote Wednesday, the Supreme Court said that the target of a grand jury investigation may be compelled by a court to sign a consent form directing his foreign bank to turn over the records to U.S. prosecutors.

The Fifth Amendment says that no person “shall be compelled in any criminal case to be a witness against himself,” but Justice Harry A. Blackmun said that this protects the suspect only from being forced to testify against himself. It does not shield him from being forced to provide potentially incriminating evidence such as fingerprints or a handwriting sample.

Blackmun said that merely signing a consent form is not “testimonial in nature” and is therefore not covered by the Fifth Amendment. Only Justice John Paul Stevens dissented.

The decision in the case (John Doe vs. U.S., 86-1753) upholds a move by a Texas grand jury that was investigating an oil dealer suspected of fraud and concealing income. The grand jury had issued a subpoena for his bank records in Bermuda and the Cayman Islands, but the oil dealer contended that being forced to sign a consent form violated his Fifth Amendment rights.

May Argue Compulsion

However, the Supreme Court ruling may not end the matter in this case and others like it. Lawyers pointed out that banks in the Cayman Islands or Switzerland may refuse to honor the U.S. court subpoena on the grounds that a consent form signed under compulsion is not voluntary waiver of the secrecy rule.

“We have not faced this question yet. It is up in the air,” said Hoechner, the Swiss legal counsel.

Other lawyers said that the outcome likely will depend on whether the foreign banks have branches in the United States. If so, U.S. prosecutors will be able to take their case to a U.S. court to try to win disclosure of the bank records. If not, they will fight the battle in a foreign court, where that nation’s bank laws will control the outcome.

In the second case (Braswell vs. U.S., 87-3), the justices were faced with the question of whether a person who has a small, personally held corporation should be treated as a corporate agent or an individual.

In the past, the high court has said that an official of a corporation must turn over its records if they are subpoenaed by prosecutors but that a person could not be forced to personally turn over his own incriminating records.

Court Splits on Issue

On a 5-4 vote, the high court said Wednesday that the officials of the personally held corporations--even if the businesses comprised no more than the individual and his family--must be viewed as corporate agents and must turn over the records even if they are personally incriminating.

The opinion was written by Chief Justice William H. Rehnquist. New Justice Anthony M. Kennedy filed a sharp dissent, saying that the individual’s Fifth Amendment right against forced self-incrimination protects the individual first and that this should prevail over court-ordered demands for corporate records. He was joined by Justices William J. Brennan Jr., Thurgood Marshall and Antonin Scalia.

The decision came in the case of a Mississippi businessman who had refused to turn over his family firm’s records in an oil and gas fraud investigation.

In the Iran-Contra case, Secord and Hakim have argued that a forced disclosure of their personal corporate records would violate their rights. A federal appellate court has blocked Walsh’s move to get the records, pending further court review.

Voids Retroactive Benefits

Meanwhile, in a move that the court said would protect the security of pension plans, the justices said that employers need not pay retroactive pension benefits to persons who retired before 1983. It was that year in which the court ruled that men and women must be given equal pension benefits. In 1977, the court had first signaled its intention by ruling that pension plans may not demand unequal contributions from male and female employees.

Last year, a federal court ruled that the Florida pension system should have changed its benefit pay-outs as of 1977, not 1983, and ordered back payments for men who filed a complaint. But the justices overturned that ruling (Florida vs. Long, 86-1685) on a 5-4 vote, saying that taxpayers do not have to pay $43.6 million to male state workers who retired before 1983.

Calls Pay-Outs Inequitable

Justice Kennedy, writing for the court, said: “The imposition of retroactive liability on the states, local governments and other employers that offered sex-based pension plans to their employees is inequitable.”