Petition for Writ of Certiorari — Thompson v. United States
Supreme Court brief1974
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Stil ' iT, U. 3. re i a
-o- 1498 MAR 29
MicuAR BFS
IN THE
SUPREME COURT OF THE UNITED STATES
HAYDEN THOMPSON; HERBERT MESCHKE; LARRY ERICKSON;
RICHARD BACKES; ~~ WILLIAMSON and MARK PURDY,
etitioners,
VS
UNITED STATES OF AMERICA,
Respondent.
PETITION FOR WRIT OF CERTIORARI
To the Eighth Circuit Court of Appeals
KERMIT EDWARD BYE
VOGEL, VOGEL, BRANTNER & KELLY
609% First Avenue North
P. 0. Box 1389
Fargo, North Dakota 58102
Counsel for Petitioners
St. Louis Law Printing Co., Inc., 812 Olive Street 63101 314-231-4477
=>
PANY THIET SS WPT ERS RS ORGS Bg URED ENGL SY are Aare 21D PRE LEE RTE OTR I
INDEX
ge? erp ac tee rr peste rma, Te a
si ky Mae are Se id be eee a big es wig age
Questions Presented ........... i Ae ces Bee tl
Constitutional Provisions Involved ...................
Statutory Provisions involved ......................
a I feos Sis oe. cee. Seecces
Reasons for Granting the Writ ......................
1. Did federal prosecution carry burden of proof with
in camera presentation of investigation reports and
grand jury minutes, without opportunity to defend-
ants to examine or cross-examine about course of
use and extent of taint therein, in pretrial use im-
munity hearing where federal prosecution followed
related State testimony under immunity? ........
2. Did the Court of Appeals err in reversing the Dis-
trict Court’s factual determination that the federal
prosecution failed to carry its burden of proof? ....
3. Did the District Court or Court of Appeals more
aptly apply the protective standards of Murphy and
ie RS Er err oer ey a ee
Ce so ee ie 352 ee Oe Late
Appendix
1. The Eighth Circuit Court of Appeals opinion dated
EG NS Sade oh ada pins rocenvenriee
| Saree SEPT RRL SE LT I PRIN
**
tw
The order of the Eighth Circuit Court of Appeals
denying the petition for rehearing and the request for
a rehearing in banc dated March 1, 1974; ......A-14
3. Order of District Court dated January 24, 1973; ..A-15
4. The memorandum and order of District Court of
ES See ree A-17
5. The federal indictment; ............----+-+0:: A-21
6. The state grand jury indictment out of Ward County,
North Dakota against the same defendants; ...... A-31
7. Companion case: United Siates v. McDaniel, 449
F.2d 832 (8th Cir. 1971) cert denied, 405 U.S. 992,
92 S.Ct. 1264, 31 Law Ed.2d 460 (1972) ...... A-40
8. Companion case: United States v. McDaniel, 482
F.2d 305 (8th Cir. 1973) .......-. tocamaene A-62
CITATIONS
Cases
Chambers v. State of Mississippi, 410 U.S. 284, 93 S.
Ct. 1038 at 1046 (1973) ......-- ee eee eee eee 13
Davis v. State of Alaska, — U.S. —, 42 L.W. 4295 (Feb.
_ 27, 1974} (Unreported at this time) ........------ 13
Kastigar v. United States, 406 U.S. 441
Ceo rer rs Teese 3, 10, 11, 12, 15, 16, 17, 18,19
Murphy v. Waterfront Comm’n., 378 U.S. 52
CN i inn nd ind sinexseuss 3, 10, 11, 12, 16, 17, 19
wee
United States v. McDaniel, 449 F.2d 832 (8th Cir, 1971),
cert denied, 405 U.S. 992 (1972) ................ 2,7
United States v. McDaniel, 482 F.2d 305 (8th Cir.
WIE feasts a Sarin be dink of ieee cic oee. oe ek
Statutes
United States Code, Title 18 §610 .:................
United States Code, Title 18, §371 ................
United States Constitution, Amendment V ............
United States Constitution, Amendment V] ..........
3 North Dakota Century Code § 16-20-10 .. 7...
er peut:
IN THE
SUPREME COURT OF THE UNITED STATES
PaaS TERM, 1974
HAYDEN THOMPSON; HERBERT MESCHKE; LARRY ERICKSON;
RICHARD BACKES; — WILLIAMSON and MARK PURDY,
etitioners,
VS
UNITED STATES OF AMERICA,
Respondent.
PETITION FOR WRIT OF CERTIORARI
To the Eighth Circuit Court of Appeals
The petitioners, Hayden Thompson; Herbert Meschke; Larry
Erickson; Richard Backes; Gary Williamson; and Mark Purdy,
respectfully pray that a writ of certiorari issue to review the
judgment and opinion of the United States Court of Appeals
for the Eighth Circuit entered in this proceeding on January
25, 1974, and the order denying the petition for rehearing
entered in this proceeding on March 1, 1974.
OPINIONS BELOW
The opinion of the Eighth Circuit Court of Appeais below,
in United States v. First Western State Bank of Minot, its No.
73-1567, is reported at ... F.2d ..., and is appended at page
A-1 hereof.
—— ar
ES see
The opinion of the District Court of North Dakota beiow, in
United States v. First Western State Bank of Minot, its Crim-
inal No. 575, is not reported, and is appended at page A-15
hereof.
The opinions of the Eighth Circuit Court of Appeals in com-
_panion cases of United States v. McDaniel, 449 F.2d 832 (8th
Cir. 1971), cert denied, 405 U.S. 992 (1972) and United States
v. McDaniel, 482 F.2d 305 (8th Cir. 1973) are appended at
page A-40 and page A-62 hereof.
JURISDICTION
The Circuit Court of Appeals’ Opinion and Order was filed
January 25, 1974, reversing the District Court's Memorandum
and Order of July 16, 1973. Rehearing was denied by the
Circuit Court of Appeals on March 1, 1974.
Jurisdiction in the Supreme Court is based upon 28 U.S.C.
$ 1254(1). Jurisdiction of the Court of Appeais was based on
18 U.S.C. § 3731.
QUESTIONS PRESENTED
1. Did federal prosecution carry burden of proof with in
camera presentation of investigation reports and grand jury
minutes, without opportunity to defendants to examine or cross-
examine about course of use and extent of taint therein, in pre-
trial use immunity hearing where federal prosecution followed
related State testimony under immunity?
2
2. Did Court of Appeals ert in reversing District Court's
factual determination that federal prosecution failed to carry
its burden of proof?
‘ii ieias
3. Did District Court or Court of Appeals more aptly apply
protective standards of Murphy v. Waterfront Commission and
Kastigar?
CONSTITUTIONAL PROVISIONS INVOLVED
Amendment V: United States Constitution F
“No person shall be held to answer for a capital, or other-
wise infamous crime, uxless on a presentment or indict-
ment of a Grand Jury, except in cases arising in the land
or naval forces, or in the Militia, when in actual service in
time of War or public danger; nor shall any person be
subject for the same offense to be twice put in jeopardy of
life or limb; nor shall be compelled in any Criminal case
to be a witness against himself, nor be deprived of life,
liberty, or property, without due process of law; nor shall
private property be taken for public use, without just com-
pensation.”
Amendment VI: United States Constitution.
“In all criminal prosecutions, the accused shali enjoy the
right to a speedy and public trial, by an impartial jury
of the State and district wherein the crime shall have been
committed, which district shall have been previously as-
certained by law, and to be informed of the nature and
cause of the accusation; to be confronted with the witnesses
against him; to have compulsory process for obtaining
witnesses in his favor, and to have the Assistance of Coun-
sel for his defense.”
STATUTORY PROVISIONS INVOLVED
United States Code, Title 18
$ 610 (relevant portion):
“It is unlawful for any national bank, or any corporation
organized by authority of aiiy law of Congress, to make a
contribution or expenditure in connection with any election
to any political office, or in connection with any primary
election or political convention or caucus held to select
candidates for any political office, or for any corporation
whatever, or any labor organization to make a contribu-
tion or expenditure in connection with any election at
which Presidential or Vice Presidential electors or a Senator
or Representative in, or a Delegate or Resident Commis-
sioner to Congress are to be voted for, or in connection
with any primary election or political convention or caucus
held to select candidates for any of the foregoing offices,
or for any candidate, political committee, or other person
to accept or receive any contribution prohibited by this
section.
“Every corporation or labor organization which makes any
contribution or expenditure in violation of this section
shall be fined not more than $5,000; and every officer or
director of any corporation, or officer of any iabor organi-
zation, who consents to any contribution or expenditure
by the corporation or labor organization, as the case may
be, and any person who accepis or receives any contribu-
tion, in violation of this section, shall be fined not more
than $1,000 or imprisoned not more than one year, or both;
and if the violation was willful, shall be fined not more than
$10,000 or imprisoned not more than two years, or both.”
od
De ee
cae ee
United States Code, Title 18
$371:
“If two or more persons conspire either to commit any
offense against the United States, or to defraud the United
States, or any agency thereof in any manner or for any
purpose, and one or more of such persons do any act to
~ effect the object of the conspiracy, each shall be fined not
more than $10,000 or imprisoned not more than five years,
or both.
“If, however, the offense, the commission of which is the
object of the conspiracy, is a misdemeanor only, the punish-
ment for such conspiracy shall. not exceed the maximum
punishment provided for such misdemeanor. June 25,
1948, c. 645, 62 Stat. 701.”
3 North Dakota Century Code, § 16-20-10:
“No person shall be excused from attending and testifying
or producing any books, papers, or other documents be-
fore any court upon any investigation, proceeding, or trial
for violation of any of the Provisions of section 16-20-08,
upon the ground that the testimony or evidence, documen-
tary or otherwise, required of him may tend to incriminate
or degrade him. No person shall be prosecuted nor sub-
jected to any penalty or forfeiture for or on account of any
transaction, matter, or thing concerning which he may
testify or produce evidence, documentary or otherwise, and
no testimeny so given or produced shall be used against
him upon any criminal investigation or proceeding.”
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STATEMENT OF THE CASE
Hayden Thompson, Herbert Meschke, Larry Erickson and
Richard Backes were directors and shareholders of First West-
ern State Bank of Minot, North Dakota. Gary Williamson and
Mark Purdy were shareholders of the Bank. Gary R. McDaniel
was the Chief Executive Officer and President of the Bank, as
well as a director and shareholder.
On May 19, 1969, McDaniel was discharged as President
of the Bank when shortages and misappropriations came to
light in the course of a state audit.
Both State and Federal grand juries investigated. A Federal
Grand Jury convened September 23, 1969 and met at frequent
intervals through July 31, 1970. A State Grand Jury convened
October 14, 1969 and met almost continuously to December
8, 1969.
All six of these defendants, and McDaniel, were subpoenaed
and testified before the State Grand Jury. Although both State
and Federal prosecutors appeared to be unaware of the immu-
nity statute, North Dakota law prevents any person from re-
fusing to testify before a grand jury investigating violations of
the State Corrupt Practices Act, but provides full immunity from
prosecution for matters disclosed. 3 North Dakota Century
Code §16-20-10.
On December 8, 1969, the State Grand Jury indicted Mc-
-niel for 19 counts of false entries, embezzlement and viola-
tions of the State Corrupt Practices Act. The Banx was in-
dicted for several violations of the State Corrupt Practices Act
and was subsequently convicted in state court. These six in-
dividual defendants were indicted on one count of aiding and
abetting political contributions by the Bank.
=i a
On February 4, 1970 (and July 31, 1970), Federal indict-
ments were returned against McDaniel on twelve counts of
embezzlement, misappropriation of funds, and making false
entries in the records of a federally insured bank.
On March 9, 1970, the state trial judge quashed all of the
state indictments against the individuals, these six defendants
and McDaniel, upon the grounds that they were immune from
Prosecution because they had testified under subpoena and oath
before the State Grand Jury.
On July 31, 1970, Federal indictments were returned against
the bank on five counts of violating 18 U.S.C. §610, and
against Thompson, Meschke, Erickson, Backes, Williamson,
and Purdy on one count of conspiracy to cause the Bank to
violate 18 U.S.C. §610. McDaniel was named as a CO-conspira-
tor but not charged in the indictment.
McDaniel was subsequently convicted on eleven counts of
embezzlement, misappropriation and false entries, but, after ap-
peal and remand, his convictions were vacated and his indict-
ments dismissed. The dismissal was affirmed by the Court of
Appeals finally, on July 31, 1973. McDaniel was discharged
upon the grounds that the United States Attorney had “used”
his State Grand Jury testiniony given under immunity, when
the U.S. Attorney on November 20, 1969, read a copy of the
transcript of McDaniel’s state grand jury testimony. United
States v. McDaniel, 449 F.2d 832 (8th Cir. 1971), cert denied,
405 U.S. 992 (1972); United States v. McDaniel, 482 F.2d
305 (8th Cir. 1973).
These defendants moved to dismiss based upon the State
immunity and the Federal prosecutor’s use of the State Grand
Jury testimony given under immunity. The motions were orig-
inally denied on February 3, 1971, by the late District Judge
Register. The motions were renewed and supplemented on Au-
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gust 13, 1971. After oral arguments before Ronald N. Davies,
Senior United States District Judge presiding, the District Court
on January 24, 1973 ordered a pretrial evidentiary hearing in
order to allow the Government “an opportunity to meet the
burden of proving that all of the evidence it proposes to use
was derived from legitimate independent sources” from the
testimonies given by the defendants before the state grand jury.
Following the evidentiary hearing held on May 8-10, 1973,
the District Court issued its Memorandum and Order on July
16, 1973, holding “that the Government wholly failed to meet”
its burden, that “not all of the evidence the United States Gov-
ernment proposes to use was derived from legitimate, independ-
ent sources and that some of the evidence is a direct result of
communications between Federal and State authorities, when
both State and Federal Grand Juries were in session and im-
mediately prior and subsequent thereto.” The District Court
concluded, “The herculean task of separating tainted evidence
from that which is not could never be determined by this
Court . .” and held that the in camera presentation of F.B.I.
reports and federal grand jury transcripts “falls far short of the
duty imposed upon” the prosecution. The Disirict Court issued
a strong suppression order, suppressing “any evidence relating”
to the testimony of these defendants before the State Grand
Jury.
The Court of Appeals reversed the order of suppression and
remanded for further exploration of the issue at trial, holding
that introduction of F.B.I. reports and federal grand jury tran-
scripts as possible independent sources sufficed to carry the
Government’s burden of proof for the pretrial evidentiary near-
ing.
The Court of Appeals barely noted, and did not discuss, the
in camera presentation of the F.B.I. reports and federal grand
jury transcripts, without opportunity to the defendants to exam-
yom
ine them or cross-examine about them. The Court of Appeals
did not have the F.B.I. transcripts and the federal grand jury
transcripts in its record, noting they “were not filed on appeal.”
(Footnote 6, Court of Appeals Opinion, p. A-10 appended
hereto). The Court of Appeals stated that “the District Court's
order does not indicate that it has reviewed those reports. . .”
The failure of the Clerk of the District Court to transmit Ex-
hibits Numbered 1 to 7 both inclusive, (Transcripts of Testi-
mony before the Federal Grand Jury) and Exhibits Numbered
8 to 33 both inclusive, (The F.B.I. reports) did deprive the
appellees of an effectual review based on the complete evidence
in the case. There is no place in the record in this case which
would indicate that the Senior United States District Judge did
not review the evidence, including transcripts of Federal Grand
Jury testimony and F.B.I. reports, which were offered and ad-
mitted into evidence over defendants’ objections.
Since the report of the Circuit Court of Appeals clearly indi-
cates that the Circuit Court did not review the F.B.I. reports and
the Federal Grand Jury Transcripts, and since Senior District
Judge Davies obviously did review those exhibits, it would appear
that the Circuit Court was proceeding on an incorrect premise
in determining this case.
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REASONS FOR GRANTING THE WRIT
The Court of Appeals recognized:
“. . . this case has profound implications in the enforce-
ment of the criminal law . . .” ¥Court of Appeals Opinion,
at p. A-2 appended). bs
With a federal prosecution following a state grant of immu-
nity on the same subject, this case involves direct application of
the protective use immunity standards forecast in this Court's
decisions, Murphy v. Waterfront Commi’n., 378 U.S. 52 (1964)
and Kastigar v. United States, 406 U.S. 441 (1972) which dealt
with use immunity at the granting stage. The issues here include
: application of the burden of proof on the prosecution to show
lack of use or derivative use in a case where the District Court
{ found access to and communication about the immunized testi-
mony. And, specifically at issue is the sufficiency of in camera
proof at the pretrial evidentiary hearing on “use”, without op-
portunity to defendants to examine or cross-examine to trace
the course of “use” and extent of taint.
1. Did Federal Prosecution Carry Burden of Proof With In
Camera Presentation of Investigation Reports-and Grand Jury
Minutes, Without Opportunity to Defendants to Examine or
Cross-Examine About Course of Use and Extent of Taint
Therein, in Pretrial Use Immunity Hearing Where Federal
Prosecution Followed Related State Testimony Under Immunity?
Thus far, the protective standards of “use immunity” have
been articulated by the Supreme Court in the .pre-testimony
cases of Murphy v. Waterfront Commission and Kastigar,
which arose from contempt orders for refusing to testify under
a grant of immunity. Here, the District Court and the Court of
Appeals were called on to apply these protective standards of
ey” ens
use immunity, for federal prosecutions following testimony under
grant of state immunity. This case involves the realities of ap-
plication of the protective standards only forecasted in Murphy
and Kastigar.
Murphy expressly held that the Fifth Amendment privilege
against self-incrimination protects a state witness, testifying
under immunity, against federal prosecutions. In a footnote,
the standard of that protection was described:
“Once a defendant demonstrates that he has testified,
under a state grant of immunity, to matters related to the
federal prosecution, the federal authorities have the bur-
den of showing that their evidence is not tainted by es-
tablishing that they had an independent, legitimate source
for the disputed evidence.”
Kastigar followed Murphy and held use immunity constitu-
tionally sufficient for single-sovereign situations as well, describ-
ing the standard of protection thus:
“This burden of proof, which we reaffirm as appropriate,
is not limited to a negation of taint; rather, it imposes on
the prosecution the affirmative duty to prove that the evi-
dence it proposes to use is derived from a legitimate source
wholly independent of the compelled testimony.”
and:
“One raising a claim under this statute need only show
that he testified under a grant of immunity in order to
shift to the government the heavy burden of proving that
all of the evidence it proposes to use was derived from
legitimate independent sources.”
Here, in spite of the testimonial protestations of the federal
and state prosecutorial staffs, the District Court found access
and use. Specifically, the District Court found testimony about
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lack of communication by the State’s prosecuting attorney “in-
credible and unworthy of belief.” The District Court went on:
“The number of telephone calls this witness had with the
United States Attorney’s office, the Federal Bureau of In-
vestigation and other investigatory or interested Federal
agencies leads to the inescapable conclusion that informa-
tion was conveyed to representatives of the United States
Government that proscribe its use in a Federal criminal
prosecution in the United States Court under the decision
of the United States Supreme Court in Murphy, Kastigar
and their progeny.”
In this context, the District Court found the in camera evi-
dentiary presentation of F.B.I. reports and federal grand jury
transcripts insufficient. The District Court concluded:
“This Court concludes that the Government wholly failed
to meet this burden. The in camera material alluded to in
the preceding paragraph sheds absolutely no light on
whether the Government has met its judicially determined
responsibilities.”
Nearly all of the documentary material was submitted by the
prosecution in camera: Exhibits 8 to 33, consisting of F.B.I.
reports, and Exhibits 1 to 7, federal grand jury transcripts.
The in camera offer in bulk was objected to by the defendants
at the hearing, upon the grounds that they were deprived of any
opportunity to examine it or cross-examine about it. (Transcript
pp. 347, 349 and 360)
This objection was carried forward on the appeal by this
statement in Appellee’s Responsive Brief, page 26 thereof:
“The Government offered evidence on an ‘in camera’ basis
so that the defendants were denied the opportunity to
examine or cross-examine about it to follow up on the
leads as to possible use. There is no denying that the right
Pe, we
of cross-examination is more than a desirable rule of trial
procedure. It is implicit in the constitutional right of con-
frontation, and helps assure the accuracy of the truth-
determining process. Dutton v. Evans, 400 US. 74, 89
(1970); Bruton v. United States, 391 U.S. 123, 135-137
(1968).”
Decisions based on secret evidence strain fundamental notions
of liberty under any circumstances. When they involve funda-
mental constitutional rights of individuals, such as the Fifth
Amendment, decisions based on secret in camera evidence surely
test the credibility of our entire judicial system.
This Court has only recently held that a governmental interest
in preserving confidentiality must yield to the defendants con-
stitutional right to cross-examine; Davis v. State of Alaska, —
US.__, 42 L.W. 4295 (Feb. 27, 1974), which held it was con-
stitutional error to deny a defendant the right to cross-examine
a juvenile witness where it conflicted with a State’s asserted in-
terest in preserving the confidentiality of juvenile adjudication
of delinquency.
As this Court has observed, cross-examination “helps assure
the accuracy of the truth-determining process”, Chambers v.
State of Mississippi, _U.S._, 93 Sup. Crt. 1038 at 1046
(1973), adding:
_ its denial or significant diminution calls into ques-
tion the ultimate ‘integrity of the fact-finding process’ and
requires that the competing interest be closely examined.”
We respectfully submit that the District Court’s determination
that the federal prosecution failed to carry its burden of proof
with an in camera offer of proof should be reinstated, under
both the Constitutional standards of the Fifth Amendment privi-
lege against self-incrimination and the Sixth Amendment right
to confrontation. The Court of Appeals’ decision, which over-
looked or ignored this issue in reviewing the District Court's
Order, should be reviewed.
ao” Se
2. Did the Court of Appeals Err in Reversing the District
Court’s Factual Determination That the Federal Prosecution
Failed to Carry Its Burden of Proof?
The Court of Appeals observed that the District Court's
order “does not indicate that it had reviewed those “eports . . .”
and concluded:
“The failure to review the Government’s contended inde-
pendent sources was error and a misinterpretation of the
eins
The Court of Appeals went on to conclude:
“That testimony (of no access), the lack of contradictory
evidence by the defendants showing actual knowledge or
access to the state grand jury transcripts by federal au-
thorities, and the introduction of the F.B.I. reports and
the state and federal grand jury minutes should have dis-
charged the Government’s burden of proving independent
sources during the pretrial hearing.”
In so doing the Court of Appeals ignored the District Court’s
specific findings of access through numerous telephone calls,
its specific finding “that information, was conveyed”, and its
specific finding that the testimony of one state prosecutor pro-
testing no access was “incredible and unworthy of belief.”
The Court of Appeals also criticizes the “lack of contra-
dictory evidence by the defendants.” Ironically, the Court of
Appeals barely notes, and does not comment upon, the fact
that the in camera tender of the documentary evidence effec-
tively denied the defendants the opportunity to develop the
contradictory evidence from its most likely source, the F.B.I.
reports and federal grand jury transcripts. How could defend-
ants trace the source of use and extent of taint, to present con-
tradictory evidence, when they were denied any opportunity
to examine the documentation of the investigation, or cross-
examine about it?
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The Court of Appeals assumed that the District Court failed
to review the F.B.I. reports and federal grand jury transcripts,
but the District Court did not say that it had not reviewed
them. The District Court listed them in its Memorandum with
the other evidence submitted and considered by the Court. The
transcript of the evidentiary hearing indicates the District Court
deferred his decision at the conclusion of the hearing in order
to read and consider the in camera material (Transcript p. 408,
lines 18-23: p. 421, lines 25 to p. 422, line 2; p. 423, lines
1-4). There is nothing in the record that indicates the District
Court did not review the in camera material between conclud-
ing the hearing on May 10, 1973 and issuing its Memorandum
and Order on July 16, 1973.
The Court of Appeals itself did not review the F.B.I. re-
ports and federal grand jury transcripts, which it stresses as
so greatly aiding the prosecution in discharging its burden of
proof. In footnote 6, to its Opinion, it states they “were not
filed on appeal.” The Clerk of the District Court failed to file
them on appeal with the Circuit Court.
Curiously, defendants find themselves in the position of hav-
ing their legal position affirmed by the Court which consid-
ered the in camera exhibits, but reversed by the Court which
did not even have those exhibits to consider but nevertheless
stressed the great importance of them. Such a result is out of
line with the usual standard of review, that Courts of review
should accept factual determinations of a trial court unless
“clearly erroneous.”
We respectfully submit that review is appropriate to deter-
mine whether the Court of Appeals erred in reversing the fac-
tual determination of the District Court that the prosecution
failed to carry its burden of proof as to use of immunized tes-
timony. Review would also determine how “heavy” is that
“heavy burden of proof” projected in Kastigar.
NEO TS TT
i —16—
3. Did the District Court or Court of Appeals More Aptly
Apply the Protective Standards of Murphy and Kastigar?
This case, and the Court of Appeals Opinion, pose several
other aspects of applying Murphy and Kastigar:
First, the decision rendered by the panel seems to rely upon
a different standard for the two-sovereign situation, than the
single-sovereign situation:
“But where the prosecuting sovereign is not the immunizing
sovereign, a considerably different situation is presented.”
(Court of Appeals Opinion, p. A-4 appended).
No such differing standards were set forth in Kastigar, when
the Supreme Court adopted the séparate-sovereign use and de-
rivative use immunity doctrine of Murphy v. Waterfront Commis-
sioners, as the constitutional standard for the Federal single-
sovereign situations. Murphy was followed in Kastigar, not
distinguished. The Court of Appeals’ decision appears to drift
away from both Murphy and Kastigar in a manner inconsistent
with the modern trend of even handed application of constitu-
tional standards.
Next, the Court of Appeals suggests the issues of use and
independent sources may be further explored at trial. However,
F.B.I. investigation reports and Grand Jury transcripts are ordi-
narily not evidence at the criminal trial itself. It is highly doubt-
ful the Government would call any F.B.I. agents to testify since
their testimony is primarily hearsay. If the immunity evidentiary
issues are to be developed in the course of trial, it will com-
pound the complexities of a multiple defendant conspiracy trial
with continual chamber sessions while the jury restlessly waits as
each new evidentiary revelation is explored, out of its presence,
for use of leads from immunized testimony. This will hardly
facilitate an orderly trial process. Thus, trial exploration. of
tainted evidence issues, as suggested by the Court of Appeals,
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is out of step with considerations of judicial economy, as well
as current judicial thinking on the orderly process of a trial,
United States v. Domau, 356 F.Supp. 1091, at 1099 (1973),
including the prior Eighth Circuit expressions on the desirability
of pretrial resolution of the issue; United States v. McDaniel (IT),
482 F.2d at 311:
“Clearly, this test envisions, under ordinary circumstances,
a pretrial evidentiary hearing at which the Government
must discharge its ‘heavy burden of proof. . .’
a * *
“Ordinarily, the question whether the prosecutor has made
any use, direct or indirect, of the compelled testimony can
‘and should be fully explored by an appropriate hearing be-
fore trial.”
Neither Murphy, nor Kastigar, suggest a procedure of exploring
the issue at trial. Indeed, everything said in those two cases sug-
gests the need and desirability of fully resolving the issue in a
pretrial evidentiary hearing.
Finally, this case presents questions as to the remedial steps
to be taken when use or derivative use is found. Defendants’
motions sought dismissal. Acting before the McDaniel (ID)
opinion was issued, the District Court fashioned a strong sup-
pression order posing great difficulties for the prosecution. Em-
phasizing what it called the “immeasurable subjective effect” of
derivative use, “. . . assistance in focusing the investigation,
deciding to initiate prosecution, refusing to plea bargain, inter-
preting evidence, planning cross-examination, and otherwise
generally planning trial strategy . . .”, the Eighth Circuit Court
of Appeals discharged the defendant in a companion case,
United States v. McDaniel (II), supra.
The Court of Appeals, in remanding this case for further
exploration of the issue at trial, instructs only limited and selec-
tive suppression of “proffered evidence . . . (which) has only
been derived from defendants’ compelled testimonies.”
us
oe
Such a limited proscription appears inconsistent with Kastigar,
where Mr. Justice Powell writing for the majority held:
“This total prohibition on use provides a comprehensive
safeguard, barring the use of compelled testimony as an
‘investigatory lead,’ and also barring the use of any evi-
dence obtained by focusing investigations on a witness as
a result of his compelled disclosures.”
Such a limited proscription also appears inconsistent with the
Eighth Circuit Court of Appeals prior pronouncement in the
related case:
“Kastigar, after all, proscribed “any use, direct or indirect
. . . And, indeed, if the immunity protection is to be
coextensive with the Fifth Amendment privilege, as it must
to be constitutionally sufficient, then it must forbid all
prosecutorial use of the testimony not merely that which
results in the presentation of evidence before the jury.”
482 F.2d at —.
See also United States v. Dornau, 356 F.Supp. 1091 (S.D.N.Y.
1973).
Several circumstances of this case might well call for strong
sanctions for any use or derivative use that occurred:
1) It took defendants over two and one-half years simply to
get an evidentiary hearing on their claims of “use” of their
immunized testimony. The federal prosecution resisted all
initial efforts for such a hearing on varying grounds, in-
cluding insistence that no state immunity had been granted
and that there had been no communication about any de-
fendants’ testimony. An evidentiary hearing came only
after defendants obtained and filed the public records of
long distance telephone calls by the State prosecutor (show-
ing communication with the federal prosecutors during
critical periods), and after the belated admission by the
|
:
=
prosecuting U.S. Attorney in the Court of Appeals in Mc-
Daniel (1) that he had read a transcript of McDaniel’s im-
munized state grand jury testimony.
2) The indictment deals with potential First Amendment
rights of association in alleging a political conspiracy that
includes specified overt acts of candidacy for various state
legislative and political party offices by each of the defend-
ants.
The sweeping reach of the indictment and the significant
delay of trial resulting from the need for this “use” should be
considerations in determining the remedy to be applied for any
use.
Thus, we submit that review is also appropriate to consider
these aspects of the application of the protective standards of
Murphy and Kastigar involved in the decisions of the Dustrm
Court and Court of Appeals in this case:
1) Whether there are different constitutional standards of
use immunity protection;
2) Whether the Constitution protection should preferably
be developed through pretrial hearings or during the course
of trial; and
3) What remedy is to be applied for “use”.
—
CONCLUSION
For these reasons, a writ of certiorari should issue to review
the judgment and opinion of the Eighth Circuit Court of Appeals.
Respectfully submitted
KERMIT EDWARD BYE
VOGEL, VOGEL, BRANTNER &
KELLY
609% First Avenue North
P. O. Box 1389
Fargo, North Dakota 58102
Telephone: 701-237-6983
Counsel for Petitioner
Of Counsel:
BAIR and BROWN
210 Ist Avenue Northwest
P. O. Box 100
Mandan, North Dakota 58554
LANIER, KNOX & OLSON
334 Gate City Building
P. O. Box 1007
Fargo, North Dakota 58102
McGEE, HANKLA, BACKES & WHEELER, LTD.
Gate City Building
P. O. Box 998
Minot, North Dakota 58701
BJELLA & JESTRAB
111 East Broadway
Drawer 1526
Williston, North Dakota 58801
McINTEE & WHISENAND
113 East Broadway
P. O. Box 1307
Williston, North Dakota 58801
on lnk cn Dies A Stent) BRP A bl Oe had Re OE
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APPENDIX 1
United States Court of Appeals
For the Eighth Circuit
No. 73-1567
United States of America, 4
Appellant,
. Appeal from the
United States Dis-
trict Court for the
District of North
Dakota
First Western State Bank of Minot,
North Dakota; Hayden Thomp- [
son; Herbert Meschke; Larry Erick-
son; Richard Backes; Gary Wil-
liamson; and Mark Purdy,
Appellees. |
Submitted: December 11, 1973
Filed: January 25, 1974
Before Gibson and Ross, Circuit Judges, and Smith, Senior
District Judge*.
Gibson, Circuit Judge.
The United States appeals pursuant to 18 U.S.C. § 3731
from an order of the District Court suppressing any testimonies
given by defendants Hayden Thompson, Herbert Meschke, Larry
* The Honorable Talbot Smith, Senior District Judge, Eastern
District of Michigan, sitting by designation.
— <p
Erickson, Richard Backes, Gary Williamson, and Mark Purdy
before the Ward County Grand Jury, North Dakota, and “any
evidence relating thereto” in this federal charge under 18
U.S.C. § 610. The District Court ordered suppression of de-
fendants’ testimonies, any evidence reijating to the testimonies,
and any use of the testimonies by the Government in relation
to defendants’ trial in federal court."
This appeals presents only one basic issue: Did the Govern-
ment establish that the evidence to be introduced in this fed-
eral prosecution against defendants had been developed from
sources independent from defendants’ testimonies before the
state grand jury? A related issue arises on the scope of the
immunity. Just because the defendants testified to certain
facts before a state grand jury does not preclude the United
States from presenting evidence of these same facts, if that evi-
dence was secured or derived from sources independent from
the immunized state testimony and if the immunized state testi-
mony was not utilized to obtain leads to other incriminating
evidence.
The defendants here claim that Kastigar v. United States, 406
U.S. 441 (1972), and Murphy v. Waterfront Commission, 378
U.S. 52. (1964); impose an almost impossible or insurmount-
able burden on the Government in prosecuting this case. The
Government agrees with that contention, if Kastigar is inter-
preted in the District Court’s manner. Since this case has pro-
found implications in the enforcement of the criminal law, we
think it advisable to set forth our views of the principles of
' The latest Supreme Court case of Kastigar v. United States, 406
U.S. 441 (1972), holds that use immunity satisfies constitutional re-
quirements and that use and derivative use of immunized testimony
is proscribed. Thus, no issue is raised on the use of this state tes-
timony itself. It cannot be used. The crucial issue, however, is
whether the United States secured its leads and derived its neces-
sary probative evidence by utilizing immunized state testimony to
gain other evidence.
—< Sn
Kastigar and Murphy as applied to the factual situation pre-
sented here.
The United States as a sovereign is not precluded from en-
forcing its laws by the grant of immunity of another sovereign,
in this case the state. However, as a matter of fairness to the
defendants and as a constitutional guarantee against self-in-
criminstion. the state immunized testimony cannot be used,
directly or indirectly, to prosecute a federal charge. Murphy v.
Waterfront Commission, 378 U.S. at 79. Because of the far-
rcaching effects of an order that suppresses vital testimony
essential to the prosecution of a criminal charge and thus in
effect grants amnesty to these defendants from a federal prose-
cution, a searching analysis of the purpose and reach of im-
munity statutes along with an analysis of the factual aspects of
this prosecution is in order.
At common law the public had the right to anyone’s testi-
mony, but the Constitution protects against self-incrimination.
Immunity statutes, long-embodied in our jurisprudential fabric,
accommodate both of these values. Immunity is generally
offered as a device to secure information on criminal activity
committed by those in privy with or those acting in concert
with the immunized witness.2 Often lesser witnesses are in-
duced to testify against more culpable offenders, who often are
operating in the higher echelons of criminal activity. It is
= Wigmore says:
Such statutes, therefore, have for more than two centuries been
the expedients resorted to for the investigation of many offenses,
chiefly those whose proof and punishment were otherwise im-
practicable because of the implication in the offense itself of
all who could bear useful testimony.
8 Wigmore, Evidence § 2281 at 492 (McNaughton rev. 1961).
For general discussion of the history and purposes of immunity
in s to grants of immunity by the United States, see Comment,
The Federal Witness Immunity Acts in Theory and Practice: Tread-
ing the Constitutional Tightrope, 72 Yale L. J. 1568 (1963).
ay ees
essentially a device to facilitate investigation of charges of cor-
ruption. Often immunity is utilized where no other legal means
appears to be available or practical to ferret out facts best
known to the culpable witnesses. The grant of use immunity
does not clothe the witness with any aura of innocence or shield
him from prosecution of the crimes inquired about, but only
prohibits the use, directly or indirectly, of his testimony against
him. This necessarily includes any leads that are derived from
such testimony. Thus, where the same sovereign is granting the
immunity and also prosecuting, that sovereign does have a
heavy burden of showing that all of the essential evidence
necessary for conviction was derived from independent sources.
Admittedly, in that situation it may be almost impossible to
separate immunized testimony and leads resulting therefrom
from evidence secured from independent sources. But where
the prosecuting sovereign is not the immunizing sovereign, a
considerably different situation is presented.
The sovereign not offering immunity has the undeniable
right to protect the integrity of its law enforcement perogatives
by prosecuting anyone who allegedly has committed an- offense
against its peace and dignity. When its own evidence and in-
vestigation discloses acts of criminal activity, an undeniable
right to prosecute exists. This right cannot be controlled,
thwarted, or diminished by another sovereign granting im-
munity from prosecution of a kindred offense. Fair play and
constitutional guarantees demand, however, that the prosecut-
ing sovereign not use, directly or indirectly, the immunized
testimony or any fruits from it. Kastigar v. United States,
supra; Murphy v. Waterfront Commission, supra. If the
prosecuting sovereign has made its independent investigation
and can show nonuse of the immunized testimony, either by
‘lack of access to the immunized testimony or direct statements
made in good faith that it did not use the immunized testimony,
it should have a clear right to proceed with its own prosecution.
However, under Kastigar and Murphy the prosecuting sovereign
4
4
3
-
desi xt
does have the burden of showing an independent source for its
evidence.
Under the facts of this case, it would appear that the United
States gathered a considerable amount of its evidence starting
May 12, 1969, some five months prior to the convening of
the state grand jury. During this interval, two federal grand
jury sessions were held. Clearly and obviously, any evidence
obtained during this period, even in conjunction with any state-
federal investigation, antedated the state grant of immunity
and should be available for use by the federal government.
The Federal Bureau of Investigation reports prior to this date
and the minutes of the two prior federal grand jury sessions
irrefragably should be considered as independent sources. After
the date of the state grant of immunity, closer scrutiny is re-
quired to ascertain if the immunized testimony was received
or made available to the federal government or was used to
obtain other incriminating evidence. Even if some question-
able evidence was obtained, that should not preclude the United
States from prosecuting if it can do so on the independent and
untainted evidence it has secured. Any tainted evidence, of
course, would be inadmissible and must be suppressed during
the trial. We feel here that the Government should be permitted
to make its case, since it claims, in good faith, independent
and untainted sources for its evidence and further asserts non-
access. The FBI reports and federal grand jury minutes should
reveal two independent sources of the Government's evidence.
This might be one of the many cases in which only a com-
plete record can ultimately resolve all questions relating to the
source of evidence.
With the above principles in mind, we examine the factual
background of this appeal. A federal grand jury was convened
in North Dakota commencing September 23, 1969, to investi-
gate, inter alia, possible contributions by First Western State
Bank of Minot, North Dakota (hereinafter Bank), some of its
officers, and others, to elections of presidential or vice-presi-
nar ae
dential electors and members of Congress.* Defendants did not ;
testify before the federal grand jury, who returned a true bill :
on July 31, 1970, charging the Bank with five violations of
18 U.S.C. §610 and the six individual defendants with will-
fully conspiring to cause the Bank to make contributions to F
certain federal elections.
Subsequent to the federal grand jury, the Ward County
’ Grand Jury, North Dakota, was called into session October 14,
1969, to investigate the same alleged activity by defendants
and others in relation to violations of the North Dakota Cor-
rupt Practices Act, N.D. Cent. Code §16-20-01 et seq. (1960).
The state grand jury met from October 14, 1969, through De-
cember 8, 1969, and all individual defendants testified. Backes
testified on October 23rd, Meschke on October 24th and 27th,
Erickson on October 29th, Williamson on October 30th and
December 3rd, Purdy on December Ist, and Thompson from
December Ist through December 3rd. On December 8, 1969,
the state grand jury charged each individual defendant with
violating N.D. Cent. Code $16-20-08 and §16-20-09 for aid-
ing, abetting, advising, or consenting in making unlawful po-
litical contributions. On March 9, 1970, a North Dakota state
district court quashed defendants’ indictment, since N.D. Cent.
Code §16-20-10 granted transactional immunity to defendants
on their testimonies before the state grand jury concerning the
charged violations. Defendants, however, still faced the above-
describec: federal charges.
In the proceedings below on these federal charges, the de-
fendants moved to quash the indictment because of purported
“immunity relating to defendants’ testimonies before the state
grand jury. Although this motion was originally denied on
February 3, 1971, by the late Judge Register, defendants again f
brought the same motion on August 13, 1971. After oral argu- ;
The federal grand jury met and was in session during the fol- 4
lowing times: September 23-26, 1969; October 7-9, 1969; Decem- :
ber 1-5, 1969; February 3-4, 1970; and July 28-31, 1970.
eed ee eens ao ee ea ED ke ee a ee Ne
np gD cin
ments, the District Court on January 24, 1973, ordered a pre-
trial evidentiary hearing in order to allow the Government “an
opportunity to meet the burden of proving that all of ‘the evi-
dence it proposes to use was derived from legitimate independent
sources” from the testimonies given by defendants before the
state grand jury. The hearing was held from May 8-10, 1973.
The District Court in its order concerning this evidentiary hear-
ing summarized the Government's evidence:
The hearing was held on schedule. The Government wit-
nesses included Richard B. Thomas, Ward County State’s
Attorney, and Paul M. Sand, First Assistant Attorney Gen-
eral for the State of North Dakota, officials that conducted
the State Grand Jury proceedings; Richard Peterson, Spe-
cial Agent of the Federal Bureau of Investigation; H. Clif-
ford Miller, Special Agent of the Federal Bureau of In-
vestigation; Harold O. Bullis, United States Attorney, Dis-
trict of North Dakota; Eugene K. Anthony, Assistant United
States Attorney, District of North Dakota; John Clark,
formerly Trial Attorney, Government Operations Section,
Criminal Division, Office of the Attorney General of the
United States; and Gary Annear, Assistant United States
Attorney, District of North Dakota. By stipulation the
deposition of Lynn E. Crooks, Assistant United States
Attorney, District of North Dakota, was taken and sub-
mitted subsequent to the hearing.
In addition to the testimony of the witnesses the Government
submitted, for in camera inspection, transcripts of testi-
mony given by witnesses appearing before the Federal
Grand Jury, together with Federal Bureau of Investigation
reports. All of the material thus submitted related to the
affairs of the First Western State Bank, Minot, North
Dakota.*
timonies before the state grand jury, since defendants filed these
— on August 13, 1971, with the motion to quash the in-
ictment.
rtp op »
one
4 The District Court also had the transcripts of defendants’ tes~”
TER RI MERLE NEN PPE NZ RIN 2 OTT ees ti
VRP
eal T o AP NOTRE RST Lys
dats aii
The Government, in part, contended before the District Court,
in its brief on appeal, and during oral argument on appeal, that
it had no access to the state grand jury transcripts of defendants’
testimonies. Defendants have not disputed this assertion, nor
have they offered any contradictory evidence. Defendants have
argued that the joint state and federal investigation of defend-
ants’ activities and the constant communication between the
state and federal prosecutors warrant the inference that the
federal prosecutors and other officials must have had knowledge
of defendants’ testimonies before the grand jury that provided
at least investigatory leads for evidence on the federal charges.
Defendants introduced records of the telepho.e company show-
ing numerous calls between the state and federal prosecution
offices and extensively cross-ext mined state and federal officials
in an attempt to demonstrate that the federal prosecutors had
actual knowledge of defendants’ testimonies before the -grand
jury. All Government witnesses denied that federal prosecutors
knew any of the testimony or had access to the transcripts.
Government witnesses testified that any conversations between
the state and federal officials concerned the exchange of docu-
ments and the scheduling of witnesses. Ward County State At-
torney Richard B. Thomas testified that he did inform federal
attorneys that defendants’ testimonies before the state grand jury
provided nothing productive. :
The District Court found that the number of telephone calls
Ward County State Attorney Thomas “had with the United
State’s Attorney’s office, the Federal Bureau of Investigation,
and other investigatory or interested federal agencies leads to
the inescapable conclusion that information was conveyed to
representatives of the United States Government that proscribe
its use in a Federal criminal prosecution in United States
Court * * *.” The District Court held that the Government
failed to meet its burden of proving legitimate, independent
sources for its evidence under Murphy v. Waterfront Commis-
sion and Kastigar v. United States and suppressed defendants’
apse MN N26: MS YET ANNE FNM LEMON NEN EPID ELE MENGE LIE REE SAE HC BED BNE MEET 2 41 T FS
MRIS PL,
‘ —A9—
testimonies before the state grand jury, any evidence relating
to the testimonies, and any use of the testimonies in relation to
defendants’ trial on the federal charges.
The scope of the trial court’s order is not exactly clear. Ob-
viously, the defendants’ state testimonies cannot be used against
them. But what is meant by “any evidence relating thereto”?
Does this mean independent evidence of the offense testified
to cannot be used, thus extending transactional immunity to
the offenses testified to, or does it merely impose a ban on
evidence obtained as a result of the defendants’ immunized tes-
timonies? We assume the latter.
In United States v. McDaniel, 482 F.2d 305 (8th Cir. 1973)
(hereinafter McDaniel I),” this court properly interpreted Kas-
tigar in holding that the Fifth Amendment only requires use
immunity. Defendants, therefore, can only complain if their
testimonies before the state grand jury were used by the fed-
eral government, the prosecuting sovereign, in obtaining evi-
dence against them for their trial under federal charges.
The federal government, however, can use the same evidence
testified to by defendants before the grand jury if it can demon-
strate that the evidence to be used against defendants came
from a legitimate source wholly independent of the compelled
testimonies. The prosecuting government’s burden of proving
a legitimate, wholly independent source for the compelled tes-
timony is explained in McDaniel II by quoting Kastigar:
“‘Once a defendant demonstrates that he has testified,
under a state grant of immunity, to matters related to the
federal prosecution, the federal authorities have the bur-
den of showing that their evidence is not tainted by ¢s-
3 This opinion concerned a review of an earlier remand by this
court in United States v. McDaniel, 449 F.2d 832 (8th Cir. 1971),
cert. denied 405 U.S. 992 (1972).
; Ret oh, ce eee
RATASR ME TTI
FOE Lh SPER OY IPS
oh sal lanl A ee COA et beatsel
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ee Ha
Santis tnetel pianos tint SOND oh) alin Deshile dt oivestia dn” are ie or
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— A-10 a
tablishing that they had an independent, legitimate source
for the disputed evidence.’ [quoting Murphy v. Waterfront
Commission, 378 U.S. 52, 79, n. 18 (1964)).
This burden of proof . . . is not limited to a negation
of taint; rather, it imposes on the prosecution the affirma-
tive duty to prove that the evidence it proposes to use is
derived from a legitimate source wholly independent of
the compelled testimony.
. . . One . . . need only show that hg testified under
a grant of immunity in order to shift to the government
the heavy burden of proving that all of the evidence it
proposes-to use was derived from legitimate, independent
sources.”
McDaniel Il, supra at 310-11, quoting United States v. Kas-
tigar, supra at 460, 461-62.
Defendants at the evidentiary hearing established that they
had testified before the state grand jury concerning activity that
is directly concerned with the federal charges in this case. De-
fendants pursuant to N.D. Cent. Code, § 16-20-10 were eventu-
ally granted transactional immunity (as a matter of state law
policy) against any possible state charges relating to their testi-
monies. The United States Attorney Bullis stipulated at the
commencement of the evidentiary hearing that defendants ap-
peared before the state grand jury. Before the evidentiary hear-
ing, defendants filed with the District Court several documents
including the state grand jury transcripts of defendants’ testi-
monies.* We think that the state grand jury transcripts clearly
* Filed with this case on appeal are the transcripts of the state
grand jury testimonies of defendants, the transcript of the eviden-
tiary hearing conducted by the District Court, and certain exhibits
admitted during the evidentiary hearing. oo ee oo
federal grand jury transcripts admitted during the tiary hear-
ing were not filed on appeal
— A-11l —
demonstrate that defendants’ testimonies were directly concerned
with the federal charges of this case, and the federal govern-
ment properly was required to demonstrate at the evidentiary
hearing the independent sources for its evidence to be intro-
duced against defendants.
We think, however, that the District Court’s finding that
“not all of the evidence the United States Government proposes
to use was derived from legitimate, independent sources and
that some of the evidence is a direct result of communications
between Federal and State authorities” as a basis for its sup-
pression ruling is clearly erroneous as a matter of law. There is
no indication in the District Court’s memorandum order that
the court attempted to ascertain whether the evidence to be pre-
sented came from independent sources or only from the defend-
ants’ testimonies before the state grand jury. Although the
Government introduced FBI reports concerning investigation of
defendants’ alleged political contributions, the District Court's
order does not indicate that it had reviewed those reports to
determine whether they could be a sufficient, wholly independ-
ent source from the compelled testimonies. The failure to re-
view the Government's contended independent sources was error
and a misinterpretation of the law announced in Kastigar and
McDaniel II.
We further think that the Government has discharged its
burden of proving independent sources during the pretrial evi-
dentiary hearing by testifying that there was no access by fed-
eral authorities to the state grand jury transcripts, by testifying
that federal authorities had no knowledge of the compelled tes-
timonies, and by introducing the FBI reports and federal grand
jury traxscripts as possible independent sources to the District
Court for its inspection. This testimony and the introduction
of the FBI reports should suffice to carry the Government's bur-
den of proof for :>e pretrial evidentiary hearing. We therefore
reverse the District Court's holding that any evidence relating
EMOTE Ng TO aR a ©
eee eee
— A-12 —
to the subject matter of defendants’ testimonies before the state
grand jury must be suppressed.
We support McDaniel II’s statement that the Government's
burden of proving independent sources should “under ordinary
circumstances” be shouldered during a pretrial evidentiary hear-
ing. Where substantial evidence is proffered showing a joint in-
vestigation, as in this case, a pretrial hearing would be advisable.
Not every case, however, would call for a further fragmentation
of the trial process by having a full-scale suppression hearing
prior to trial. The ascertaining of independent sources can often
be better considered during the trial, since all the evidence
is placed on the record or offered for introduction at the
trial. To some extent, this is a matter of degree. For exam-
ple, isolated questions concerning suppression of certain evi-
dence should not call for a full-scale suppression hearing of
all the evidence that is to be offered by the Government. In
general, where feasible and compatible with fairness to the de-
fendant, the trial process should not be further fragmented if at
all possible.
The resolution of the Government’s burden of proof in Mc-
Daniel II during a pretrial evidentiary hearing was eased by an
admission of the United States Attorney that he had read the
state grand jury transcript. McDaniel Il therefore concluded the
testimony read by the United States Attorney “could not be
wholly obliterated from the prosecutor’s mind in his prepara-
tion and trial of the case.” McDaniel II, supra at 312. In this
light, the McDaniel II court held that the Government failed to
prove that the United States Attorney “did not use [McDaniel’s
testimony] in some significant way short of introducing tainted
evidence.” McDaniel II, supra at 311. Since the United States
Attorney had read the state grand jury transcript in McDaniel I
and since the reading of a transcript makes proof of independ-
ent sources much more difficult for the Government, resolution
of this burden of proof issue duripg a pretrial evidentiary hear-
ing was considerably facilitated.
— A-13 —
In this case, the federal officials have testified that they had
no access to or knowledge of the state grand jury transcripts.
That testimony, the lack of contradictory evidence by the de-
fendants showing actual knowledge or access to the state grand
jury transcripts by federal authorities, and the introduction of
the FBI reports and the state and federal grand jury minutes
should have discharged the Government's burden of proving
independent sources during the pretrial hearing.
After reviewing the FBI reports and the state and federal
grand jury transcripts, the District Court may indeed find that
proffered evidence by the Government during the forthcoming
trial has only been derived from defendants’ compelled testi-
monies. If that occurs, suppression of that evidence is de-
manded.
The District Court's order of suppression is reversed and the
case is remanded for further proceedings consistent with this
opinion.
A true copy.
Attest:
Clerk, U:S. Court of Appeals, Eighth Circuit.
— A-14—
APPENDIX 2
United States Court of Appeals
for the Eighth Circuit
Pee ey Ly Pe
~
September Term, 1973
Og ee
73-1567
United States of America,
ink 5 bet he tak tial
AppeMant, | Appeal from the
vs. United States Dis-
‘ trict Court for the
: First Western State Bank of Minot, District of North
; North Dakota, et al., Dakota
Appellees. J
F
:
The Court having considered petition for rehearing en banc
filed by ‘counsel for appellees and, being fully advised in the
premises, it is now here ordered that the petition for rehearing
en banc be, and it is hereby, denied.
Considering the petition for rehearing en banc as a petition
for rehearing, it is now here ordered that the petition for re-
hearing also be, and it is hereby, denied.
; March 1, 1974
PREP ere Sa “
PONE OES ot I Ee are REE er ree en +
SRRUENTE HI eT ye me
— A-15 —
APPENDIX 3
In the United States District Court for the
District of North Dakota
Northwestern Division
United States of America, ‘
Plaintiff,
vs.
|
First Western State Bank of Minot, [ Criminal No. 575.
North Dakota; Hayden Thompson, ;
Herbert Meschke; Larry Erickson; |
Richard Backes; Gary Williamson; |
and Mark Purdy, |
Defendants.
Order for Evidentiary Hearing as to Claim of Immunity
The Government having conceded that each of the individual
defendants herein gave testimony before a North Dakota State
Grand Jury under a grant of immunity, and it appearing that
the individual defendants may have testified to matters relating
to the subject matter of the indictment (cne count of conspiracy
as to the individual defendants), and it further appearing that
the defendants have made a prima facie showing of frequent
communications between Federal and State authorities at times
when both State and Federal Grand Juries were in session, and
immediately prior and subsequent thereto,
It Is Ordered that a pre-trial evidentiary hearing be held at
the Federal Courtroom at Minot, North Dakota, commencing
May 8, 1973, at 10:00 o'clock a.m., to give the Government
an opportunity to meet the burden of proving that all of the
=
tate eeteeecarrs ae
. oe a I ee eee
Tey RED SFE E Pe we
De mel a ek ets eo
Spent isa AVS ao vk Blind i lla i eli
— A-16 — '
evidence it proposes to use was derived from legitimate inde-
pendent sources. i
Dated at Fargo, North Dakota, this 24th day of January,
A.D. 1973.
‘s/ Ronald N. Davies
Senior United States District Judge
CAEN OO rap oe — 7 7 . 4 oT
: e oo < ro . 7 . a 7
= a8 «33
=~
APPENDIX 4
Memorandum and Order
On the 24th day of January, A.D. 1973, this Court entered
the following order in the above-entitled case:
“Order for Evidentiary Hearing as to
Claim of Immunity
“The Government having conceded that each of the indi-
vidual defendants herein gave testimony before a North
Dakota State Grand Jury under a grant of immunity, and
it appearing that the individual defendants may have testi-
fied to matters relating to the subject matter of the indict-
ment (one count of conspiracy as to the individual defend-
ants), and it furthcr appearing that the defendants have
made a prima facie showing of frequent communications
between Federal and State authorities at times when both
State and Federal Grand Juries were in session, and im-
mediately prior and subsequent thereto,
“It Is Ordered that a pre-trial evidentiary hearing be held
at the Federal Courtroom at Minot, North Dakota, com-
mencing May 8, 1973, at 10:00 o'clock a.m., to give the
Government an opportunity to meet the burden of prov-
ing that all of the evidence it proposes to use was derived
from legitimate independent sources.”
The hearing was held on schedule. The Government wit-
nesses included Richard B. Thomas, Ward County State’s At-
torney, and Paul.M. Sand, First Assistant Attorney General for
the State of North Dakota, officials that conducted the State
Granz Jury preceedings; Richard Peterson, Special Agent of
the Federa! Bureau of Investigation: H. Clifford Miller, Special
Agent of the Federal Bureau of Investigation; Harold O. Bullis,
pa ee
wRieinkced Bint tired be Tapa ods
La ALC ARID ee
a. ee GER Free at
Biisstericns Biiesstesh adic balboa Ward LCStream
2
4
— A-18 —
United States Attorney, District of North Dakota; Eugene K.
Anthony, Assistant United States Attorney, District of North
Dakota; John Clark, formerly Trial Attorney, Government Oper-
ations Section, Criminal Division, Office of the Attorney Gen-
eral of the United States; and Gary Annear, Assistant United
States Attorney, District of North Dakota. By stipulation the
deposition of Lynn E. Crooks, Assistant United States Attorney,
District of North Dakota, was taken and submitted subsequent
to the hearing.
In addition to the testimony of the witnesses the Government
submitted, for in camera inspection, transcripts of testimony
given by witnesses appearing before the Federal Grand Jury,
together with Federal Bureau of Investigation reports. All of the
material thus submitted related to the affairs of the First Western
State Bank, Minot, North Dakota.
The question for determination is simple but vital. Did the
Government meet the burden of proving that all of the evidence
it proposes to use was derived from legitimate, independent
sources?
This Court concludes that the Government wholly failed to
meet this burden. The in camera material alluded to in the pre-
ceding paragraph sheds absolutely no light on whether the Gov-
ernment has met its judicially determined responsibilities.
“As stated in Murphy [Murphy v. Waterfront Comm’n,
378 U.S. 52, 84 S.Ct. 1594, 12 L.Ed.2d 678):
‘Once a defendant demonstrates that he has testified,
under a state grant of immunity, to matters related to
the federal prosecution, the federal authorities have the
burden of showing that the evidence is not tainted by
establishing that they had an independent, legitimate
source for the disputed evidence.’ 378 U.S., at 79
n. 18.
3
3
fic
“This burden of proof, which we reaffirm as appropriate,
is not limited to a negation of taint; rather, it imposes on
the prosecution the affirmative duty to prove that the evi-
dence it proposes to use is derived from a legitimate source
wholly independent of the compelled testimony.”
* * * * * * *
“Moreover, a defendant against whom incriminating evi-
_ dence has been obtained through a grant of immunity may
be in a stronger position at trial than a defendant who as-
serts a Fifth Amendment coerced-confession claim. One
raising a claim under this statute need only show that he
testified under a grant of immunity in order to shift to the
government the heavy burden of proving that all of the evi-
dence it proposes to use was derived from legitimate inde-
pendent sources.” Kastigar v. United States, 406 U.S. 441,
460-461, — S.Ct—, — L.Ed.2d —. (Emphasis added.)
The Court now addresses itself to the testimony cf Ward
County State’s Attorney, Richard B. Thomas, and whether he
discussed testimony of the individual defendants given before
the Ward County Grand Jury with United States Government
officials. The Court finds much of his testimony incredible and
unworthy of belief. The number of telephone calls this witness
had with the United States Attorney’s office, the Federal Bureau
of Investigation and other investigatory or interested Federal
agencies leads to the inescapable conclusion that information
was conveyed to representatives of the United States Govern-
ment that proscribe its use in a Federal criminal prosecution in
United States Court under the decisions of the United States
Supreme Court in Murphy, Kastigar and their progeny.
It is apparent to this Court that not all of the evidence the
United States Government proposes to use was derived from
legitimate, independent sources and that some of the evidence
is a direct result of communications between Federal and State
PEED TE RAEN ILL ELOOLOA ELE ES
rer.
Senne
—
authorities, when both State and Federal Grand Juries were in
session and immediately prior and subsequent thereto. The
herculean task of separating tainted evidence from that which
is not could never be determined by this Court at the evidentiary
hearing held herein for the basic reason that the United States
did not show that all the evidence it proposes to use was derived
from legitimate, independent sources. It contended itself with
an in camera presentation which falls far short of the duty im-
posed upon it not only by this Court’s order of January 24,
1973, but more importantly it fails to meet the tests enumerated
by the United States Supreme Court in the cases cited in this
memorandum,
For the reasons set out herein,
It Is Ordered that any testimony given by the defendants
Hayden Thompson, Herbert Meschke, Larry Erickson, Richard
Backes, Gary Williamson and Mark Purdy, all of whom testi-
fied under grant of immunity before the Ward County, North
Dakota, Grand Jury, or any evidence relating thereto, be and
the same is hereby suppressed, and its use prohibited upon trial
of Criminal Case Number 575, Northwestern Division, United
States District Court for the District of North Dakota.
Dated at Fargo, North Dakota, this 16th day of July, A.D.
1973.
/s/ Ronald N. Davies
Senior United States District Judge
*
— <
APPENDIX 5
In the United States District Court '
For the District of North Dakota
Northwestern Division
United States of America,
Vv. Indictment
First Western State Bank of Minot, | Charge: Violation of
North Dakota, Hayden Thomp- Title 18 US.C.,
son, Herbert Meschke, Larry Erick- Sections 610 and
son, Richard Backes, Gary Wil- 371
liamson, and Mark Purdy.
The Grand Jury Charges:
Count One
1. First Western State Bank of Minot, North Dakota (here-
after referred to as the Bank) is, and was at all times material to
this Indictment, a corporation.
2. On or about August 13, 1966, in the District of North
Dakota, Defendant First Western State Bank did knowingly
and unlawfully make a contribution and expenditure in connec-
tion with an election for the office of United States Representa-
tive in Congress, by means of issuing its expense check No.
2244, in the amount of $50.00, drawn on Account No. 0913-
. 1044 at the First Western State Bank, payable to U.S. Post-
office, signed by A. D. Leslie. (In violation of Section 610 of
Title 18, United States Code.)
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Bis PRIN enter crareneenn
. AS a% SPORE VP AR TNR LER ISR aR OR — -
DRE SSIS PIE PEARED: ty te SINE OP eta ke
ey ea
The Grand Jury Further Charges:
Count Two
1. The allegations contained in paragraph 1 of Count One
of this Indictment are incorporated in this Count.
2. On or about August 13, 1966, in the District of North
Dakota, Defendant First Western State Bank: did knowingly
and unlawfully make a contribution and expenditure in connec-
tion with an election for the office of United States Representa-
tive in Congress, by means of issuing its expense check No.
2245, in the amount of $950.00, drawn on Account No. 0913-
1044 at the First Western State Bank, payable to U- _States
Post Office, signed by A.D. Leslie. (In violation of Se...un 610
of Title 18, United States Code.)
The Grand fury Further Charges:
Count Three
1. The allegations contained in paragraph 1 of Count One of
this Indictment are incorporated in this Count.
2. On or about September 3, 1968, in the District of North
Dakota, Defendant First Western State Bank did knowingly
and unlawfully make a contribution and expenditure in con-
nection with the election of Presidential and Vice Presidential
Electors in the 1968 general election by causing the issuance
of check No. 306, in the amount of $3,500.00, drawn on Ac-
count No. 10-926-8 of the Minot License Agency at the First
Western State Bank, payable to Douglas Sutter, signed by
Jeanne Quick. (In vioiation of Section 610 of Title 13, United
States Code.)
Bes
ee
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— A-23 —
The Grand Jury Further Charges:
Count Four
1. The allegations contained in paragraph 1 of Count One
of this Indictment are incorporated in this Count.
2. On or about June 22, 1968, in the District of North Da-
kota, Defendant First Western State Bank did knowingly and
unlawfully make a contribution and expenditure in connection
with the election of Presidential and Vice Presidential Electors
in the 1968 general election by causing the issuance of check
No. 193, in the amount of $420.00, drawn on Account No.
10-926-8 of the Minot License Agency at the First Western
State Bank, payable to United Democrats for Humphrey, signed
by Jeanne Quick. (In violation of Section 610 of Title 18,
United States Code.)
The Grand Jury Further Charges:
Count Five
1. The allegations contained in paragraph 1 of Count One
of this Indictment are incorporated in this Count.
2. On or about June 6, 1968, in the District of North Da-
kota, Defendant First Western State Bank did knowingly and
unlawfully make a contribution and expenditure in connection
with a primary election held to select candidates for the office
of President of the United States, by making a payment of
$1,500.00 to Robert Larson. (In violation of Section 610 of
Title 18, United States Code.)
—_ =
The Grand Jury Further Charges:
Count Six
1. The allegations contained in paragraph 1 of Count One
of this Indictment are incorporated in this Count.
2. Hayden Thompson was at all times material to this In-
dictment an officer of the Bank, and from and after February
1, 1966, a Director of the Bank.
3. Herbert Meschke was, from and after February 1, 1966,
a Director of the Bank.
4. Larry Erickson was at ali times material to this Indict-
ment a Director of the Bank.
5. Richard Backes was, from and after October 12, 1966, a
Director of the Bank.
6. Gary Williamson is, and has been since on or about
March, 1967, a shareholder of the Bank.
7. Mark Purdy is, and has been since on or about March,
1967, a shareholder of the Bank.
8. At all times hereafter mentioned, the term “Federal
election” means an election at which Presidential and Vice
Presidential electors or candidates for the offices of United
States Senator and United States Representative in Congress,
were voted for.
9. From in or about 1964 and continuously thereafter until
in or about 1969, in the City of Minot, in the District of North
Dakota and elsewhere, Hayden Thompson, Herbert Meschke,
Purdy, Defendants herein, and Gary McDaniel, named herein
as a co-conspirator but not a Defendant, did wilfully, know-
— oe
ingly, and unlawfully conspire and agree with one another
and with other persons to the Grand Jurors known and un-
known, to violate Section 610 of Title 18, United States Code,
in that they did wilfully, knowingly, and unlawfully conspire
and agree to cause First Western State Bank to make con-
tributions and expenditures in connection with Federal elections.
10. it was a part of the conspiracy that the Defendants and
co-conspirator would cause the Bank to make political con-
tributions and expenditures in pursuance of a plan to increasc
the Bank’s deposits and assets through the acquisition and
exercise of political power and influence on the national, State,
and local levels.
11. It was further a part of the conspiracy that the Defend-
ants and co-conspirator would cause the Bank to spend money,
not only on Federal elections, but also on State and local elec-
tions, State and national political conventions, political enter-
taining, and other political activities, in order to help the De-
fendants and co-conspirator gain power in the Democratic Non-
Partisan League of North Dakota.
12. It was further a part of the conspiracy that the political
power to be acquired by the Defendants and co-conspirator
would be used in part to exert influence upon agencies and
associations participating in Federally-funded or Federally-
assisted programs and having substantial funds available for
deposit, to place such funds on deposit with the Bank.
13. It was further a part of the conspiracy that the Defend-
ants and co-conspirator would seek election to public or Demo-
cratic Non-Partisan Leagues offices themselves and would cause
the Bank to bear a large share of the financial burden of their
own campaigns for election to such offices.
14. It was further a part of the conspiracy that the use of
Bank funds for illegal political contributions and expenditures,
le te at Pn ate POPES SOF LYSE s.r
— A-26 —
and the nature and extent of the Bank's involvement in political
campaigns, would be concealed by channeling bank funds
through business enterprises which would appear to be separate
and independent from the Bank, but which would, in fact, be
used primarily as devices to carry on the Bank’s political activi-
ties. In that connection, it was part of the conspiracy that the
North Dakota Secretarial Service would be used as such a
device during the 1966 election year, and that the Minot License
Agency would be used for that purpose during the 1968 elec-
tion year; and it was further a part of the conspiracy that the
expenses of the political activities to be carried on through the
North Dakota Secretarial Service and the Minot License Agency
would be paid by the Bank, by means of loans and transfers of
cash from the Bank to those enterprises, and by permitting
them to overdraw their checking accounts at the Bank regularly.
15. It was further a part of the conspiracy that the Bank
would also be caused to bear the expenses of election campaigns
by means of such additional devices as lending the services of
salaried Bank employees to campaign organizations while con-
tinuing to pay their salaries, donating postage, and permitting
regular overdrafts on accounts used for political purposes.
16. In pursuance of the aforesaid conspiracy, and to effect
the objects thereof, the Defendants and co-conspirator per-
formed the following and other overt acts within the District
of North Dakota and other places:
Overt Acts
1. On or about February 1, 1966, co-conspirator Gary Mc-
Daniel became President of First Western State Bank.
2. On or about September 1, 1966, co-conspirator Gary Mc-
Daniel arrange to have Glory Ann Dickinson sign a promis-
sory note payable to First Western State Bank, in the amount
Xu
of $4,000.00. ,
— A-27 —
3. In or about May 1968, co-conspirator Gary McDaniel
met with Douglas Sutter and Defendant Larry Erickson at the
Ramada Inn, in Minot, North Dakota.
4. In or about April, 1968, co-conspirator Gary McDaniel
and Defendants Larry Erickson and Hayden Thompson traveled
to South Dakota.
5. In or about October 1967, co-conspirator Gary Mc-
Daniel arranged to have the Minot License Agency placed
under the supervision of the Bank.
6. From in or about September 1968 until in or about No-
vember 1968 co-conspirator Gary McDaniel served as chair-
man of the Citizens for Humphrey organization in North
Dakota.
7. On or about July 16, 1968, co-conspirator Gary Mc-
Danie! wrote a letter to Eiler Ravenholt.
8. On or about October 25, 1968, co-conspirator Gary Mc-
Daniel wrote a letter to Hubert H. Humphrey.
9. In the general election of 1968 in the State of North
Dakota, Defendant Hayden Thompson was a candidate for the
office of State Representative, Seventh Legislative District of
North Dakota.
10. In the general election of 1968 in the State of North
Dakota, Defendant Hayden Thompson served as Finance
Chairman for the campaign of Thomas Surgum, a candidate
for the office of Attorney General of North Dakota.
11. On or about July 11, 1966, in Minot, North Dakota,
Defendant Hayden Thompson met with Defendants Herbert
Meschke and Larry Ezickson, and co-conspirator Gary Mc-
Daniel, and presided over a meeting of the Executive Commit-
tee of the Board of Directors of First Western State Bank.
— A-28 — |
12. In or about 1966, in Minot, North Dakota, Defendant
Hayden Thompson gave instructions to Glory Ann Dickinson
concerning the preparation and mailing of campaign literature
in connection with his candidacy for the office of State Repre-
sentative, Seventh Legislative District of North Dakota.
13. In the general election of 1966 in the State of North
Dakota, Defendant Herbert Meschke was a candidate for the
Office of State Senator, Fifth Legislative District of North
Dakota.
14. In or about June, 1968, at the State Convention of the
Democratic Non-Partisan League, in Bismarck, North Dakota,
Defendant Herbert Meschke sought the nomination of the
Democratic Non-Partisan League for the office of United
States Senator in the general election of 1968.
15. In or about 1966, in Minot, North Dakota, Defendant
Herbert Meschke gave instructions to Glory Ann Dickinson
concerning the preparation and mailing of campaign literature
in connection with his candidacy for the office of Senator,
Fifth Legislative District of the State of North
16. In the general election of 1966 in the State\of North
Dakota, Defendant Larry Erickson was a candidate for the office
of State Representative, Seventh Legislative District of\ North
Dakota.
17. In or about December 1966, Defendant Larry Eric
became State Chairman of the Democratic Non-Partisan Lea
of North Dakota. ;
18. In or about 1966, in Minot, North Dakota, Defendant
Larry Erickson gave instructions to Glory Ann Dickinson con-
cerning the preparation and mailing of campaign literature in
connection with his candidacy for the office of State Representa-
tive, Seventh Legislative District of North Dakota.
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PBR ET PIONS LOPLI ONE NE LTTE IGE TY A 5 SL TIERED A > tee \ :
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19. On or about March 10, 1969, in Bismarck, North Da-
kota, Defendant Larry Erickson met with Defendants Hayden
Thompson, Richard Backes, and Herbert Meschke, and co-con-
spirator Gary McDaniel, at a meeting of the Executive Com-
mittee of the Board of Directors of First Western State Bank.
20. In the general election of 1968, Defendant Richard
Backes was a candidate for the office of State Representative,
Third Legislative District of the State of North Dakota.
21. In or about 1966, in Minot, North Dakota, Defendant
Richard Backes gave instructions to Glory Ann Dickinson con-
cerning the preparation and mailing of campaign literature in
connection with his candidacy for the office of State Representa-
tive, Third Legislative District of the State of North Dakota.
22. On or about April 29, 1969, Defendant Richard Backes
met with Defendants Hayden Thompson, Herbert Meschke and
Larry Erickson, and co-conspirator Gary McDaniel, at a meet-
ing of the Executive Committee of the Board of Directors of
First Western State Bank.
23. In the general election of 1966 in the State of North
Dakota, Defendant Gary Williamson was a candidate for the
office of State Representative, Fifth Legislative District of North
Dakota.
24. In or about June, 1968, in Minot, North Dakota, Defend-
ant Gary Williamson met with Defendant Mark Purdy and co-
conspirator Gary McDaniel, and with Robert Larson, Cheryl
rgstrom, Caroline Gardiner, and Douglas Sutter.
5. In or about June, 1968, at the State Convention of the
ratic Non-Partisan League of North Dakota, Defendant
Mark\Purdy was a candiate for Democratic National Committee- —
man for the State of North Dakota.
26. I or about January, 1969, at Bismarck, North Dakota,
Defendant, Mark Purdy met with Defendants Herbert Meschke
BIRT eae ATA RNR HY “ree me ees ee gee
Ba aa iia Vee oar
DET RIORT VE O
’
and Larry Erickson, and with Robert Larson, and introduced
Robert Larson to Fred Harris.
— A-30 —
27. On or about August 13, 1966, in Minot, North Dakota,
co-conspirator Gary McDaniel directed Alex Leslie to purchase
United States postage stamps in the total amount of $1,000.00.
28. On or about September 3, 1968, co-conspirator Gary
McDaniel approved payment of the sum of $3,500.00 to Doug-
las Sutter.
29. On or about June 22, 1968, co-conspirator Gary Mc-
Daniel approved payment of the sum of $420.00 to United
Democrats for Humphrey.
30. On or about June 6, 1968, co-conspirator Gary McDan-
iel approved payment of the sum of $1,500.00 to Robert Larson.
as
31. On or about February 6, 1968, co-conspirator Gary Mc-
Daniel paid the sum of $3,000.00 to Defendant Larry Erickson.
32. On or about March 20, 1967, Defendant Herbert
MeSthke became the Registered Agent of Western Management
Corporation.
(In violation of Title 18 United States Code, Section 371.)
A True Bill.
Harold O. Bullis
United States Attorney
John E. Clark
Special Attorney
Indictment
Indictment under Section 16-20-08 of the North Dakota Cen-
tury Code, as amended, making unlawful political contributions
by a corporation in the years of 1966 and 1968, in which
State-wide elections were held.
\
s I
The Grand Jury of the County of Ward, in the Fifth Judi-
cial District, State of North Dakota, duly and legally impan-
eled, charged and sworn according» to law in open Court at
the special October term of the District Court in the year 1969,
in and for the said County and State, in the name and by the
authority of the State of North Dakota, does hereby charge
that at different times in the years of 1966 and 1968, up to
May 19, 1969, the First Western State Bank at Minot, North
Dakota, a corporation organized and incorporated under the
laws of the State of North Dakota, and doing business in this
State, did directly or indirectly pay, use, offer, consent, or agree
to pay or use, any money, property or anything of value to
aid a political party, committee or organization, or to aid a
corporation or association organized or maintained for political
purposes, or to aid candidates for political office, which po-
litical contributions were in violation of the provisions of Sec-
tion 16-20-08 of the North Dakota Century Code, as amended,
and were made, wholly or substantially, by one or more of
the following methods, or combinations thereof:
A. The said corporation acquired control of a license agency
on or about October 9, 1967, and employed deceptive, circui-
tous methods in making political contributions by and through
such license agency so as to make it appear that such con-
—— ‘te oe LOMPYAR PEE TI te pg
SO RE RE ERLE NEE FORESEES REIT TSE BY
— A-32 —
tributions and secretarial services for political purposes came
from the earnings of the license agency, whereas, in fact, the
political contributions substantially exceeded the earnings of
said license agency and consisted of funds of the First Western
State Bank which were made available by allowing overdrafts
on the License Agency’s checking account, making available
to said License Agency and allowing it to use proceeds of loans
from said bank on notes executed by Jeannie Quick, with the
oral understanding and agreement that no demand or collec-
tion will be enforced by said bank against Jeannie Quick for
such notes, by fictitious loans made by said bank on notes
executed in the names of Leonard and Alfred Pietsch, the pro-
ceeds of which were used to remove from the bank records
loans made by said Jeannie Quick and the overdrafts of the
License Agency, by using funds of said bank to pay the salary
of Jeannie Quick while she was managing the License Agency
and not performing any services for said bank.
B. The said First Western State Bank encouraged the acti-
vation of and financed the North Dakota Secretarial Service
the successor to the Ward County Research and Development
Company, to perform stenographic and clerical services for
political candidates or organizations which, as of May 19, 1969,
had not paid for such services, but the costs were financed from
the proceeds of a loan made by the First Western State Bank
on a note executed by Glory Ann Dickinson with the oral
understanding that no demand or collection will be enforced
against said Glory Ann Dickinson on said note, and from pro-
ceeds of a loan on a note executed by the First Western Man-
agement Company in favor of Leonard Pietsch, for which a
real estate loan with said bank by Leonard Pietsch was re-
duced in the amount of the Glory Ann Dickinson note, which
was later removed from the records of the said bank from the
proceeds of fictitious notes of Leonard and Alfred Pietsch, and
in this manner the said First Western State Bank made political
- contributions in violation of law by and through such North
Dakota Secretarial Service.
REAR PEER TL SSPE TEAS EE PE EH LO ONE SELL LIIN LTE Ke oe MI ER ATE
S|
— a
C. The said bank also expended its funds in making avail-
able for political purpuses goods, materials, and typing equip-
ment without charging or being reimbursed for same,
D. The said bank paid from its funds salaries, fees or wages
“ to certain persons for performing political services; and
E. The said bank in certain instances allowed overdrafts on
checking accounts, which accounts were known by said bank to
be used solely or primarily for political purposes and activities.
The specific violations are, to wit:
Count 1 :
That said First Western State Bank, as stated and charged in
Paragraph I. above, did in the year of 1968 make political con-
tributions in violation of Section 16-20@8% of the North Dakota
Century Code to the campaign activities of Hubert H. Humphrey,
the Democrat candiate for United States President, in the manner
set forth in Paragraph A. above, by making a payment from the
License Agency on June 22, 1968, in the amount of $420.00
to the United Democrats for Humphrey.
Count 2
That said First Western State Bank, as stated and charged in
Paragraph I. above, did at different times in the year 1968,
from June Ist to November Sth of said year, make political con-
tributions in violation of Section 16-20-08 of the North Dakota
Century,Code to the campaign activities of Hubert H. Humphrey,
Democrat candidate for United States President, by paying for
the political services and expenses of the “Humphrey Girls” and
other personnel to appear and campaign for said’ Hubert H.
Humphrey at different times and places in the State of North
Dakota and in the State of South Dakota.
Pit nsmrs sn CETERA FRI
area wes Sat Bi caer
EP NE AOE LOY DUT EER.
ay eae
Count 3
That said First Western State Bank, as stated and charged in
Paragraph I. above, did on or about August 13, 1966, make
political contributions in violation of Section 16-20-08 of the
NDCC to the campaign activities of Rollin Redlin, the Democrat-
NPL candidate for United States Congress, in the form of stamps
paid for from funds of the First Western State Bank in the
amount of approximately $1,000.00.
Count 4
That said First Western State Bank, as stated and charged
in Paragraph I. above, did at different times in the year 1968,
make political contributions in violation of Section 16-20-08
of the NDCC to the campaign activities of Rollin Redlin, the
Democrat-NPL candidate for United States Congress, in the
form of secretarial services ali paying for some expenses from
funds of said bank through the License Agency, as described
in Paragraph A. above.
Count 5
That said First Western State Bank, as stated and charged in
Paragraph I. above, did at different times in the year of 1968,
make political contributions in violation of Section 16-20-08
of the NDCC to the campaign activities of William L. Guy, the
Democrat-NPL candidate for Governor of the State of North
Dakota, by paying the salary and expenses of Robert Larson
as Chairman of “The Dakotans for Guy”, from the funds of said
bank through the License Agency as described in Paragraph A.
and from funds described in Paragraph D. above.
Count 6
That said First Western State Bank, as stated and charged in
Paragraph I. above, did during the year of 1968, make political
*
i
“
Lag PET ESSE RR IES TE PS IL EOS EE ONL EE MN LN IES IE SY _
— A-35 —
contributions in violation of Section 16-20-08 of the NDCC to
the campaign activities of Robert P. McCarney, the Republican
candidate for Governor of the State of North Dakota, by paying
a special consideration of $2,500.00 to Glory Ann Dickinson for
returning to North Dakota from Colorado to perform secretarial
services for Robert P. McCarney at Bismarck, North Dakota,
and by paying approximately $1,000.00 as part of her salary
while she was performing such secretarial service, which pay-
ments were made from the funds of said bank through the Li-
cense Agency, as described in Paragraph A. above.
Count 7
That said First Western State Bank, as stated and charged
in Paragraph I. above, did in the year of 1968, in the month
of June, make political contributions in violation of Section
16-20-08 of the NDCC to campaign activities of Mark F. Purdy,
a candidate for the office of National Committeeman of the
Democrat Party, by providing material, telephone and printing
matter and expenses of personnel to campaign at the Democrat
Convention in Bismarck, North Dakota, the cost of which was
paid for by said bank through the License Agency in the man-
ner as described in Paragraph A. above. :
Count 8
That said First Western State Bank, as stated and charged in
Paragraph I. above, did on or about July 5, 1968, make po-
litical contributions in violation of Section 16-20-08 of the
NDCC, to the campaign activities of Thomas L. Burgum, the
Democrat-NPL candidate for Attorney General of the State of
North Dakota, by paying to said activity the sum of $2,500.00
from the License Agency, which came from funds of the First
Western State Bank, as described in Paragraph A. above, and
by creating a checking account in the name of “Burgum for
— A-36 —
Attorney General”, which was overdrawn in its inception in
the amount of approximately $3,416.90, and subsequently
charged off through a fictitious note.
Count 9
That said First Western State Bank, as stated and charged in
Paragraph I. above, did on or about April 7, 1969, make a
political contribution in violation of Section 16-20-08 of the
NDCC to the Democrat-NPL political organization of the Fifth
Legislative District of the State of North Dakota, in the amount
of $2,100.00 in a check drawn on the License Agency, which
funds were in reality funds of the First Western State Bank, as
described in Paragraph A. above.
Count 10
That said First Western State Bank, as stated and charged in
Paragraph I. above, did in the years of 1966, 1967, and 1968,
make political contributions in violation of Section 16-20-08 of
the NDCC to the “Century Club”, an inter-party organization
created and existing solely for the benefit of the Democrat-NPL
political organization, by paying dues for certain members of
said “Century Club” from funds of the bank in the amount of
$1,300.00 on April 14, 1967.
Count 11
That said First Western State Bank, as stated and charged in
Paragraph I. above, did in the year 1968 make political con-
tributions in violation of Section 16-20-08 of the NDCC to
“Lloyds of Bismarck”, an organization or association function-
ing primarily for the arranging of and providing for political ad-
vertising in newspapers, radio and television for candidates of
the Democrat-NPL political party, by allowing and permitting
Bh a cae eT lk RE Ne ed Ad RA OME NER DE OER ASS: 5 LRM OTR EES YO RAYS
—
said organization to overdraw its checking account with the
First Western State Bank and by using a fictitious note to re-
move the overdraft.
Count 12
That said First Western State Bank, as stated and charged
in Paragraph I. above, did on or about November 27, 1968,
pay to the “Pietsch Flying Service” the sum of approximately
$2,086.85 for airplane transportation service used for political
activities, in violation of Section 16-20-08 of the NDCC, which
funds came from the First Western State Bank through the
License Agency, as described in Paragraph A. above.
Count 13
That said First Western State Bank, as stated and charged
in Paragraph I. above, did on or about July 13, 1967, make a
political contribution in violation of Section 16-20-08 of the
NDCC. to the “John F. Kennedy Memorial”, which is also to
serve as headquarters for the Democrat-NPL Party, in the
amount of $4,500.00, which funds came from the First West-
ern‘State Bank.
Count 14
That said First Western State Bank, as stated and charged in
Paragraph I above, did make political contributions in violation
of Section 16-20-08 of the NDCC to the Democrat-NPL Party
on or about April 14, 1967, in the amount of $1,300.00; on or
about June 6, 1968, in the amount of $984.00; and on or about
June 10, 1968, in the amount of $658.00, which payments
came from funds of the First Western State Bank.
Count 15
That said First Western State Bank, as stated and charged in
Paragraph I above, did make political contributions in violation
a —_ Ne HG RMR MEIER
— A-38 —
of Section 16-20-08 of the NDCC to the campaign activities of
Douglas Sutter, a candidate for Alderman of the Fifth Ward of
the City of Minot, in a special election originally scheduled to
be held on April 15, 1969, but which was actually held on June
17, 1969, by permitting the account entitled “Sutter Campaign
Func” to be created by an overdraft on March 19, 1969, and
continued to be overdrawn to July 16, 1969, in the amount of
$1,656.73, which amount has been charged off as a loss.
Contrary to the form of the statute in such case made and
provided, and against the peace and dignity of the State of
North Dakota.
State of North Dakota
vs.
First Western State Bank
15 Counts
A True Bill, dated December 8, 1969
/s/ Bruno P. Serrano
Foreman of the Grand Jury
Note: Names of witnesses appearing before the Grand Jury are
set forth on the page attached and made a part hereof.
ert ae oe , Clerk of the Ward County District
Court, Minot, North Dakota, filed the within instrument on the
. day of December, 1969.
— A-39 —
Elaine Hendrickson
Hayden Thompson
Joan Parks
Herbert Meschke
Gary Williamson:
Herbert L. Thorndal
Jeanette Seitzer
Alfred Pietsch
Robert Larson
Palmer Rustan
Karen Peterson
Louise Vigness
Marjorie Parizek
Linda Donnelly
Margaret Keller
Richard Dobson
Jean Quick
Larry Fiedler
Patricia Wallen
Connie Filler
Thomas Burgum
Wesley Keller
Alex Leslie
Leonard Pietsch
James Norton
Gary McDaniel
Robert Keim
Richard Backes
Sheryl Bergstrom
Lloyd Omdahl
Mark Purdy
Larry D. Erickson
Charles Boyd-Snyd
James McDonald
John Cousins
Carolyn Gardiner
Richard Spaulding
Jonathan Eaton
Mike Dolan
Douglas Sutter
Judith Fitzgerald
Evelyn Pottinger
Patricia Gefroh
Clair Watne
Glory Ann Dickinson
Harold Moen
Karen Morris
Kathy Putz
Marlene Olson
a
449 F.2d 832 (1971)
United States of America, Appellee,
v.
Gary R. McDaniel, Appellant.
Nos. 20722-20724.
United States Court of Appeals, Eighth Circuit.
Oct. 14, 1971.
Rehearing and Rehearing En Banc
Denied Jan. 3, 1972.
Court for the District of North Dakota, George S. Register,
Chief Judge, of embezzlement and misappropriation of funds
and making false entries in records of federally insured bank,
and he appealed. The Court of Appeals, Gibson, Circuit Judge,
held that if defendant, who had been compelled to testify be-
fore state grand jury, with grant of immunity from state prose-
cution, had testified before jury as to matters related to federal
prosecution, the federal indictment should have been dismissed,
in view of the fact that the United States attorney had viewed
transcript of testimony before state grand jury.
Remanded.
;
4
3
os
eee en es en a
— A-41 —
1. Indictment and Information Key 137(1)
A motion to quash the indictment is the proper method of
raising issue whether a defendant who has been compelled to
testify before state grand jury and who has been granted trans-
actional immunity is entitled to transactional as opposed to use
immunity as regards related federal prosecution.
2. Indictment and Information Key 140(1)
Where defendant moved to suppress indictment and filed ac-
companying motion to take evidence on immunity issues and
indicated that once relevant evidence had been discovered he
would move to suppress any tainted evidence but who made
no motion to suppress evidence to which grant of immunity
was claimed to attach issue whether defendant, who had been
compelled to testify before state grand jury and who had been
granted full immunity from prosecution for matters disclosed,
was entitled to “transactional” as opposed to “use” immunity as
regards related federal prosecution had been properly raised.
3. Indictment and Information Key 140(2)
Once a defendant demonstrates that he has testified, under
state grant of immunity, to matters related to federal prosecu-
tion, the federal authorities have the burden of showing that
their evidence is not tainted by establishing that they had an
independent, legitimate source for the disputed evidence.
4. Witnesses Key 297(14), 304(1)
— A-42 —
within meaning of rule preventing federal use of testimony
compelled by a state grant of immunity. U.S.C.A.Const.
Amend. 5.
5. Witnesses Key 297(14), 304(1)
Rule preventing use of state compelled testimony by the fed-
eral gevernment also forbids federal access to testimony com-
pelled by state grant of immunity. U.S.C.A.Const. Amend. 5.
6. Criminal Law Key 42
Where the sovereign questioning a defendant under grant of
immunity is also the prosecuting sovereign, defendant is en-
titled to transactional immunity and may not be prosecuted
as to those matters to which the testimony relates. U.S.C.A.
Const. Amend. 5.
7. Criminal Law Key 42
Although Congress can extend immunity against state prose-
cution if it so desires by way of supremacy clause, states do not
have a corresponding power to impose their immunity grants
on the federal government. U.S.C.A.Const. Amend. 5.
8. Criminal Law Key 42
Where there has been a state grant of immunity in return for
compelled testimony, the federal government can obtain access
to that testimony only at the cost of foregoing federal prose-
cution as to those matters to which the testimony relates, not-
withstanding that the federal government might have an inde-
pendent source for its evidence. U.S.C.A.Const. Amend. 5.
ke A-43 —
\
9. Criminal Law Key 42
we
Fact that defendant’s compelled testimony before state grand
jury related only to charges f “bribery” and “corrupiion”, and
not to charge of “embezzlement” and “misapplication of bank
funds” did not establish that there was no immunity from fed-
eral prosecution for embezzlement and misapplication of bank
funds since test of whether immunity has been acquired in
return for compelled testimony is not what legal labels are
attached to the criminal conduct which is the subject of the
incriminating testimony but whether the conduct revealed by
the compelled state testimony is related to the subject matter
of the federal prosecution. U.S.C.A.Const. Amend. 5.
10. Criminal Law Key 1181
Remand for evidentiary hearing on issue whether compelled
state testimony relating to violation of North Dakota Corrupt
Practices Act was related to subject matter of federal prose-
cution for misappvopriation of funds and making false entries
and records of federally insured bank was required where there
were not sufficient facts in record to enable reviewing court
to make final determination of such issue but there was enough
evidence to indicate that defendant's allegation that he had
testified to matters relating to federal prosecution was not frivo-
lous. 18 U.S.C.A. §§ 2, 656, 1005; NDCC 16-20-01 et seq.,
16-20-10; U.S.C.A.Const. Amend. 5.
11. Judgment Key 828(3.10)
priation of bank funds we. -overed by defendant’s testimony
under grant of immunity unc:r siaic Corrupt Practices Act
was not ultimately binding on the federal government on issue
whether any of defendant's compelled testimony related to fed-
SP Retr s 3
a ee
eral prosecution for misappropriation of funds and making
false entries in records of a federally insured bank. U.S.C.A.
Const. Amend. 5.
12. Criminal Law Key 1036(1), 1044
Where all evidence seized in response to subpoena was made
available to defendant and his attorneys prior to trial, .attor-
neys made photocopies of anything they desired, no motion to
suppress or objection to admission was made on ground that
certain evidence fell within attorney-client privilege and no
motion to quash subpoena had been made, reviewing court
would not determine whether or not such material was protected
by attorney-client privilege.
13. Criminal Law Key 641.7(1)
Where counsel of defendant’s own choosing was appointed
some 5% months prior to trial and apparently had been work-
ing on case for some time prior to that, during that period de-
fendant had been allowed extensive discovery and all costs of
discovery and trial were borne by the government, it was not
abuse of discretion, in absence of factual showing, to deny mo-
tion for an additional attorney some four days prior to date
case was set for trial.
14. Criminal Law Key 633(1)
Where no motion for change of venue, on ground of preju-
dicial pretrial publicity, was made prior to trial, most pretrial
publicity had occurred quite some time before trial, any pub-
licity which occurred shortly before trial was due to statements
made to press by defendant and his attorney and any member
of jury panel who indicated that he had formed an opinion
7
ae BR Te I
— A-45 —
due to newspaper publicity was excused for cause, there was
no error with respect to trial as regards bias and prejudice al-
legedly due to pretrial publicity. .
15. Criminal Law Key 126(1) 3
~
Where court could find no error with respect to first trial,
as regards bias and prejudice allegedly due to prejudicial pre-
trial publicity, and there were no intervening circumstances be-
tween first and subsequent trials which would justify a change
of venue on ground of bias and prejudice, motion for change
of venue of subsequent trials was properly denied. i
~<
~ «
William R. Mills, Bismarck, N. D., for appeliant.
Harold O. Bullis, U. S. Atty., Fargo, N. D., for appellee.
Before Gibson and Ross, Circuit Judges, and Eisele,* Dis-
trict Judge.
Gibson, Circuit Judge.
This is a consolidated appeal by the defendant, Gary Mc-
Daniel, from conviction in two cases of embezzlement, and
misappropriation of funds and making false entries in the rec-
ords of a federally insured bank, in violation of 18 U.S.C.
§§ 2, 656, and 1005. At the time of the events in question,
McDaniel was President of the First Western State Bank of
the City of Minot, North Dakota, whose deposits are insured by
the Federal Deposit Insurance Corporation.
* United States District Judge for the Eastern District of Arkan-
sas, sitting by designation.
——————
eciliiat cis
The facts of the case are not seriously in dispute. The bank
was significantly involved in various political activities in the
state of North Dakota, a circumstance in apparent violation of
North Dakota and Federal statutes, and considerable manipu-
lation of bank records was done by various employees of the
bank under McDaniel’s direction in order to cover up these
activities. Most of the transactions involved in these convictions
involved this manipulation, although one involving a $27,000
payment on McDaniel’s house was apparently not politically
connected. Discovery of these irregularities commenced May
12, 1969, when state bank examiners arrived for a routine ex-
amination of the bank. The state examiners were shortly joined
by examiners of the FDIC, and this prosecution and convic-
tion followed. : :
Although the defendant raises numerous points of error, the
most significant one is that his conviction was obtained in vio-
lation of his privilege against self-incrimination under the Fifth
Amendment. The facts surrounding this claim of error are as
follows:
Shortly after the discovery of irregularities in the bank’s op-
eration by state and federal examiners, an intensive investiga-
tion was undertaken into the possibility of criminal violations.
The complaint in one of the cases before us was filed August
7, 1969. McDaniel was subpoenaed to appear before a federal
grand jury on September 23, 1969. He did appear and refused
to testify, relying on his privilege against self-incrimination.
Upon leaving the grand jury room following this refusal, he
was taken to the United States Attorney’s office, where he was
served with a subpoena to appear before a state grand jury.
McDaniel, on October 15, 1969, appeared before the state
grand jury, which was investigating the bank’s operations for
violations of North Dakota’s Corrupt Practices Act, 3 N.D.
C.C. § 16-20-01 et seq. North Dakota law prevents any per-
— A-47 —
son from refusing to testify on the grounds of self-incrimina-
tion before a grand jury investigating violations of the Corrupt
Practices Act, but provides full immunity from prosecution for
matters disclosed.1 McDaniel testified for many days before the
state grand jury.
On November 6, 1969, the United States Attorney for the
District of North Dakota wrote to the Assistant State Attorney
General conducting the state’s investigation, requesting to see
a copy of the state grand jury transcript. The United States
Attorney conceded at oral argument before us that he did in
fact see the transcript, although he did not concede that Mc-
Danie! testified to matters relevant to the instant criminal
charges. The state grand jury transcript has not been made
a part of this record, and we are not aware of its contents.
On December 8, 1969, the state grand jury returned three
indictments against McDaniel, the first one containing fifteen
counts of violating the Corrupt Practices Act, the second con-
taining one count of embezzlement of bank funds in excess of
$10,000, and the third containing three counts of making false
entries in the records of the bank. Federal indictments were
returned February 4, 1970, and July 31, 1970.
McDaniel’s defense counsel in the state proceedings was the
same as his court-appointed counsel in the federal prosecutions.
1 The pertinent statute, 3 N.D.C.C. § 16-20-10, provides as fol-
OWS:
“No person shall be excused from attending and testifying
or producing any books, papers, or other documents before any
court upon any investigation, maces te ee for a violation
of any of the provisions of section 16- , upon the ground
that the testimony or evidence, documentary or otherwise, re-
quired of him may tend to incriminate or degrade him. No
rson shall be prosecuted nor subjected to any penalty or for-
eiture for or on account of any transaction, matter, or thing
concerning which he may testify or produce evidence, docu-
mentary or otherwise, and no testimony so given or produced
shall be used against him upon any criminal investigation or
proceeding.”
a rg
= yen
Motions were made in the state court to suppress the state in-
- dictments on the grounds that McDaniel was immune from
prosecution under the statute set forth above because of his
testimony before the state grand jury. Although the state’s at-
torney opposed the motion to suppress the indictments and the
transcript of the grand jury testimony was not produced in the
state proceedings, the state’s attorney did stipulate in the state
hearing on the motion to suppress that McDaniel had testified
under subpoena and oath before the state grand jury on all
matters encompassed in the state indictments. On the basis
of this concession, the state trial judge quashed the state indict-
ments.
Prior to trial on the federal charges, McDaniel’s attorney
moved to suppress the indictments on the grounds that he had
testified under compulsion before the state grand jury and had
been granted immunity from prosecution; he also moved for
an order to take testimony and produce evidence in support
of the motion to suppress. These motions were denied by the
trial court on the grounds that the immunity was granted only
as to the state crimes designated in the Corrupt Practices Act
(e. g., making campaign contributions), that these crimes bore
no relationship to the federal crimes with which he was charged,
and that therefore the grant of immunity did not extend to
these charges. This ruling was made without an evidentiary
hearing.
[1, 2] Prior to reaching the merits of this issue, we must deal
with the Government’s argument that this claim of error has
been waived. The Government contends that a motion to sup-
press the indictment is not the proper method to raise the issue
of a prior grant of immunity, and that it should be raised by a
motion to suppress evidence to which the grant of immunity is
claimed to attach. McDaniel made no motions to suppress evi-
dence on this ground. We reject the Governinent’s contention.
In the first place, this contention begs the basic issue raised
in this case, namely whether McDaniel is entitled to “trans-
ae sane
— A-49 —
actional” as opposed to “use” immunity as a result of his ap-
pearance before the state grand jury—i.e., whether his com-
pelled testimony before the state grand jury precludes federal
prosecution for such crimes as his testimony related to, or
whether the federal government is merely prohibited from
using that testimony, either directly or indirectly, in its own
prosecution. If, as he contends, McDaniel is entitled to trans-
actional immunity, a motion to suppress the indictment is
clearly the only means of accoinplishing that end. The authori-
ties recognize that a motion to quash the indictment is the
proper method of raising this issue. 8 Wigmore, Evidence
(McNaughton ed. 1961), § 2282, (4) p. 519; Smith v. United
States, 337 U.S. 137, 145, 69 S.Ct. 1000, 93 L. Ed. 1264
(1949); Edwards v. United States; 312 U.S. 473, 61 S.Ct. 669,
85 L. Ed. 957 (1941) (plea in bar, which under the modern
federal rules would of course be supplanted by a motion to
dismiss).
Furthermore, McDaniel’s motion to dismiss was accom-
panied by a motion to take evidence on the immunity issue in
which he clearly indicated that once the relevant evidence had
been discovered he would make a motion to suppress any
tainted evidence. This motion was also denied without an evi-
dentiary hearing. We conclude thet this issue was properly
raised in the trial court.
This case presents the difficult question of what immunity is
sufficient to supplant the Fifth Amendment's privilege against
self-incriminaticn where the questioning sovereign is a State
and the prosecuting sovereign is the Federal Government. It
is clear in this case that as to the questioning sovereign, the
State of North Dakota, McDaniel received “transactional im-
munity”—i.e., immunity from prosecution for offenses revealed
by the compelled testimony. McDaniel contends that under
the standards of Counselman v. Hitchcock, 142 U.S. 547, 12
S.Ct. 195, 35 L.Ed. 1110 (1892), the Federal Government
— A-50 —
must also be precluded from prosecuting him for any offensts
related to his compelled testimony. He relies primarily on the
following language:
“Tt is quite clear that legislation cannot abridge a con-
stitutional privilege, and that it cannot replace or supply .
one, at least unless it is so broad as to have the same ex-
tent in scope and effect. * * *
“We are clearly of opinion that no statute which a
the party or witness subject to prosecution after he an-
swers the criminating question put to him, can have the
effect of supplanting the privilege conferred by the consti-
tution of the United States. * * * In view of the constitu-
_ tional provision, a statutory enactment, to be valid, must
afford absolute immunity against future prosecution for
the offense to which the question relates.” Jd. at 585-586,
12 S.Ct. at 206.
The Government, on the other hand, contends that only
“use” immunity—i.e., that neither the compelled testimony nor
evidence derived from it may be used in the federal prosecu-
tion—is required under the principles of Murphy v. Waterfront .
Commission, 378 U.S. 52, 84 S.Ct. 1594, 12 L.Ed.2d 678
(1964), and that there was no such use in the instant case.
To this contention, McDaniel responds that Murphy and
Counselman are in irreconcilable conflict and urges us to dis-
regard the rule of Murphy and grant the absolute immunity
called for by Counselman.
We agree with the Government that the Murphy rule is
controlling in the instant situation and we do not think this
presents any necessary | conflict with the Counselman case.
Counselman was concerned with the situation’ where the ques-
tioning sovereign is also the prosecuting sovereign. In such a
situation, the constitutional problems posed by the Fifth Amend-
ment are not complicated by considerations of federalism.
PAE PETS I SRY CRA RS of OOTY
/
i
ANN SALA OE SEL AIT HP ROR ROR OTT RII -
= AS) —
Where the questioning sovereign is a State, however, and the
prosecuting sovereign is the Federal Government, problems of
federalism—which also of course are constitutional in nature
—affect the Fifth Amendment question. And i it is precisely this
situation that Murphy controls, preventing the use of the com-
pelled testimony by the Federal Government, but not prevent-
ing prosecution provided that the Federal Government has an
independent source for its evidence.
[3] McDanie!’s testimony in the state grand jury proceedings
was not actually introduced nor referred to in the federal prose-
cution. But the Fifth Amendment protection goes further than
this and prohibits the Government from using the “fruits” of
his testimony. Murphy, 378 U.S. at 79, 84 S.Ct. 1594. The
Government contends that it has not violated this aspect of the
Murphy rule, relying on the blanket assertion that all its evi-
dence was obtained from an independent source. The Murphy
case makes clear, however, that this issue is a question of fact
which requires an evidentiary hearing and that the Government
has the burden of proof:
“Once a defendant demonstrates that he has testified,
under a state grant of immunity, to matters related to
the federal prosecution, the federal authorities have the
burden of showing that their evidence is not tainted by
establishing that they had an independent, legitimate
source for the disputed evidence.” 378 U.S. at 79 n. 18,
84 S.Ct. at 1609 (emphasis added).
[4] Since no evidentiary hearing was held on this issue, under
ordinary circumstances we would remand the case for an evi-
dentiary hearing as to whether the defendant in fact testified
to matters related to the federal prosecution, as he alleges, and
if so whether the Government had an independent source for
its evidence. The circumstances of this case, however, are not
ordinary, for we are faced with the fact that the United States
— A-52 oa
District Attorney requested and received a transcript of the
compelled state testimony. We conclude that this conduct
violated the defendant's Fifth Amendment rights and constitutes
a prima facie “use” of the testimony which is prohibited by the
Marphy exclusionary rule.
We reach this conclusion for the following reasons. The aim
of the Murphy rule is to leave “the witness and the Federal Gov-
ernment in substantially the same position as if the witness had
claimed his privilege in th. absence of a state grant of immu-
nity.” 378 U.S. at 79, 84 S.Ct. at 1610.2 This purpose can be
achieved only if the Federal Government is forbidden not only
to introduce the testimony as evidence or to obtain investigatory
leads from it, but is also forbidden to see it. For if the witness
munity,” there would be nothing for the Federal Government to
grant of state immunity.” 378 U.S. at 93, 84 S.Ct. at 1610. In
2 And see Mr. Justice White's concurring opinion, id. at 101, 84
S.Ct. at 1615. ao
“This secures the of th: privilege
-mcrimination for all defendants without
local law-enforcement and i activities. It, of course,
forecloses the use of im any
es
“E09
|
|
|
— A-53 —
arguing that this rule would adequately protect the witness’ Fifth
Amendment rights, Mr. Justice White emphasized that the testi-
mony is not ordinarily available to the Federal Government and
could be obtained only by misconduct, “a matter quite sus-
ceptible of proof.”
“In the absence of any misconduct or collusion by fed-
eral officers, whatever increase there is, if any, in the like-
lihood of federal prosecution following the witness’ appear-
ance before a state grand jury or agency results from the
inferences drawn from the invocation of the privilege to
under federal law and not from the fact the witness has tes-
tified in what is frequently an in camera proceeding under
a grant of immunity. Whether in camera or not, the tes-
timony itself is hardly reported in newspapers and the tran-
scripts and records of the state proceedings are not part of
the files of the Federal Government. Access and use re-
quire misconduct and collusion, a matter quite susceptible
of proof.” Id. at 102, 84 S.Ct. at 1616 (emphasis added).
[5] Another reason for concluding that the Murphy rule for-
bids federal access to testimony compelled by a state grant of
immunity is our belief that the Fifth Amendment requires im-
munity from federal prosecution, or in other words “fransac-
tional immunity”, where the questioning sovereign is the Federal
Government. Of course, if the Federal Government could com-
pel the testimony itself and then prosecute for matters related to
the testimony on the basis of “untainted” evidence, or in other
words grant only “use immunity”, there would be no problem
in this case, for by hypothesis the Government would have had
the right to see the testimony. And indeed, one Circuit Court
of Appeals has held that Murphy permits such a result. See
Stewart v. United States, 440 F.2d 954 (9th Cir.), cert. granted,
402 U.S. 971, 91 S.Ct. 1668, 29 L.Ed.2d 135 (1971). How-
ever, the Seventh Circuit, the Third Circuit and the District
—
a”
a
Court for the Southern District of New York have concluded
that transactional immunity is required as to the questioning
sovereign, and we agree with those decisions. See In re Kor-
man, 449 F.2d 32, 9 Crim.L.Rep. 2161 (7th Cir. 1971); Catena
v. Elias, 449 F.2d 40, 9 Crim.L.Rep. 2475 (3d Cir. 1971); In
_te Kinoy Testimony, 326 F.Supp. 407 (S.D.N.Y. 1971). See
also the dissenting opinions in Piccirillo v. New York, 400 U.S.
548, 91 S.Ct. 520, 27 L.Ed.2d 596 (1971) (the majority did
not reach the issue of what type of immunity is constitutionally
required).
It is somewhat ironic that the debate concerning the consti-
tutional sufficiency of immunity statutes to replace the Fifth
focus so radically in recent years. In the three cases in which
the Supreme Court has upheld immunity statutes in the face of
a challenge that they violated Fifth Amendment rights, those
v. Walker, 161 U.S. 591, 16 S.Ct. 644, 40 L.Ed. 819 (1896);
Ullmann v. United States, 350 U.S. 422, 76 S.Ct. 497, 100
L.Ed. 511 (1956); Reina v. United States, 364 U.S. 507, 81
S.Ct. 260, 5 L.Ed.2d 249 (1960). Those statutes were sustained
in the face of vigorous dissents which contended, not that the
statutes gave too much in return for the forced waiver of the
Fifth Amendment, but that even complete immunity from prose-
cution was insufficient to accomplish the protection accorded to
witnesses by the Fifth Amendment privilege. As Mr. Justice
Brennan has pointed out in his dissent in Piccirillo, it has never
been suggested by the Supreme Court in cases involving a single
prosecution is sufficient to replace the privilege against self-in-
crimination. Piccirillo v. New York, 400 U.S. at 569, 91
S.Ct. 520. (Majority dismissed writ as improvidently granted.)
That the Murphy rule of “use immunity” was not intended to
be the standard to be applied to a single jurisdiction is demon-
— A-55 —
strated by the case of Albertson v. Subversive Activities Control
Board, 382 U.S. 70, 86 S.Ct. 194, 15 L. Ed.2d 165 (1965),
decided only two terms after the Murphy case. In Albertson,
the Supreme Court struck down a federal immunity statute on
the grounds that it did not meet the Counselman requirement
of immunity from prosecution, and hence violated the Fifth
Amendment. The Court reasoned:
“In Counselman v. Hitchcock, 142 U.S. 547 [12 S.Ct.
195, 35 L.Ed. 1110], decided in 1892, the Court held
‘that no [immunity] statute which leaves the party or wit-
ness subject to prosecution after he answers the criminat-
ing question put to him, can have the effect of supplanting
the privilege * * *,’ and that such a statute is valid only
if it supplies “a complete protection from all the perils
to guard * * *° by affording ‘absolute immunity against
future prosecution for the offense to which the question
relates.’ Jd., at 585-586 [12 S.Ct. at 206.] Measured by
these standards, the immunity granted by § 4(f) is not com-
plete.” 382 U.S. at 80, 86 S.Ct. at 199 (emphasis added).
No suggestion was made in Albertson that a “use immunity”
phy case was not even cited. Indeed, the case implicitly rejects.
such a standard. The Government in that case argued that the -
information required by the registration form would not be
incriminatory because it already had all the information re-
quired by the form. The Supreme Court rejected this argument:
“The representation that the information demanded is of
no utility is belied by the fact that the failure to make the
disclosure is so severely sanctioned; and permitting the
incompleteness of § 4(f) to be cured by such a representa-
that a statute in order to supplant the privilege, must pro-
vide ‘complete protection from all the perils against which
— A-56 —
the constitutional prohibition was designed to guard.’” Id.
at 81, 86 S.Ct. at 200.
[6] We think Counselman v. Hitchcock clearly commands
“transactional immunity” against the questioning sovereign, and
that the constitutional principle requiring “absolute immunity”
or protection as wide in scope as the privilege against self-in-
The Supreme Court has never deviated from this principle as.
respects the questioning sovereign, but has consistently and re- ©
peatedly cited Counselman with approval in applying its hold-
ing. See, e. g.. Brown v. Walker, supra (1895); McCarthy v.
Arndstein, 266 U.S. 34, 42, 45 S.Ct. 16, 69 L.Ed. 158 (1924);
United States v. Monia, 317 U.S. 424, 428, 63 S.Ct. 409, 87
L.Ed. 376 (1943); Hoffman v. United States, 341 U.S. 479, 490,
71 S.Ct. 814, 95 L.Ed. 1118 (1951); Ulimann, supra (1956);
Albertson, supra (1965).
The Murphy case clarified the existing law and overruled
cases restricting the privilege to the questioning sovereign. In
expanding the privilege to include a possible but yet real danger
of prosecution by a non-questioning sovereign, the Murphy
Court did establish that as to a non-questioning sovereign “use
immunity” was a minimal requirement, and that “use immu-
nity” was a permissible constitutional procedure to use in the
Gual sovereignty situation. The Court recognized the validity of
the privilege as against a non-questioning sovereign, and also the
imposition of the Fifth Amendment privilege on the states by
way of the Fourteenth Amendment as held in Malloy v. Hogan,
378 US. 1, 84 S.Ct. 1489, 12 L.Ed.2d 653 (1964).
[7] The “use immunity” recognized as constitutionally per-
missible in Murphy appears to be a practical accommodation
where dual sovereignties are involved as in our Federal struc-
ture, and has the effect of preserving in substantial measure the
individual’s constitutional privilege against self-incrimination as
en an
— A-57 —
to a non-questioning sovereign, while allowing the non-ques-
tioning sovereign to administer its own criminal laws and ef-
fectuate its own public pelicy within certain limits.*
[8] If the premise is accepted that as to the Federal Govern-
ment only transactional immunity is sufficient to supplant the
privilege against self-incrimination, then it follows that where
there has been a state grant of immunity in return for compelled
testimony, the Federal Government can obtain access to that
testimony only at the cost of foregoing prosecution as to those
matters to which the testimony relates. For if the Federal
Government must forego prosecution when it compels testi-
mony, under a grant of immunity, then surely it cannot avoid
ihis result by permitting the State to compel the testimony and
then obtaining that testimony for its own purposes. By forbidding
prosecution under these circumstances, the principles of the
transactional rule as to a single jurisdiction are maintained.
Frm a practical standpoint, also, forbidding prosecution
under these circumstances seems to be the only appropriate
sam ticn to apply. If the Government were allowed to prove
tha: it iad an independent source for its evidence in spite of the
fr.ct thet it has had access to and actually seen the compelled
testimony, the Murphy exclusionary rule of either testimony or
its fruits would be significantly weakened. For the Government’s
burden to prove its independent source arises not upon a show-
ing that it has seen the compelled testimony, but merely upon
a showing that the defendant has in fact testified under a state
grant of immunity. 378 U.S. at 79 n. 18, 84 S.Ct. 1584. If the
3 Congress can, of course, extend the immunity against state
poommnsten 3.5 £0. Sesbne way of the Clause of the
‘onstituti Brown v. W: “161 US. 91, 16 S.Ct. 644, 40
L.Ed. 819 (1895); Adams v. Maryland, 347 US. 1 2,
98 L.Ed. 608 (1954); Ullmann v. United States, 350 U.S. 422, 76
S.Ct. 497, 100 L.Ed. 511 (1956). States, of course, do not ha
ve
a corresponding power to impose their immunity grants upon the
Federal Government.
STWR
oe J
ae
Federal Government is allowed to prosecute despite the fact
that it has seen the compelled testimony, there is clearly no
deterrent to its seekin, access to that testimony. Therefore, if,
as argued above, Murphy is intended to forbid such access, the
only effective sanction for this evasion of the Murphy rule is to
forbid prosecution.
:
2
5
S
'
>
For the foregoing reasons, we conclude that if in fact Mc-
Daniel testified before the state grand jury as to taatters related
to the instant prosecution, then simce the Government has seen
that testimony, the indictments should be dismissed. To avoid
possible misunderstanding, we thimk it appropr’ate to empha-
size that the failure of the Federal prosecution here arises not
because McDaniel was granted immunity under state law, but
because the Federal Government took advantage of this im-
munity to gain access to his testimony. Had there been no such
access, the prosecution could have proceeded as normal, subject,
on proper objection, to a showing that the Government had an
independent source for its evidence.
[9] We next deal with the Gowernment’s contention, which
was accepted by the trial court as the basis for disposition of this
issue, that there is no immunity, either use or transactional, in- {
volved in this case because McDaniel’s testimony before the i
state grand jury related only to charges of bribery and corrup- |
tion, not embezzlement and misapplication of bank funds. The
test, however, of whether immunity has been acquired in return
for compelled testimony is not what legal labels are attached to
the criminal conduct which is the subject of the incriminating
testimony, but whether the conduct revealed by the compelled
testimony is related to the subject matter of the federal prosecu-
tion. The defendant must demonstrate “that he has testified,
under a state grant of immunity, to matters related to the federal
prosecution * * *.” Murphy v. Waterfront Comm'n, 378 U.S. i
at 79 n. 18, 84 S.Ct. at 1609 (emphasis added). This obviously 3
is a question of fact which cannot be determined without an evi-
dentiary hearing.
— A-59 —
[10] Since no evidentiary hearing was held on this matter in
the trial court, there are not sufficient facts in the record to en-
able us to make a final determination on this issue. The Gov-
ernment, though admitting that it has seen the transcript of the
state grand jury testimony, denies that McDaniel testified as to
any matters relating to the federal prosecution. There is enough
evidence in the record, however, to indicate that McDaniel’s al-
legation that he has testified as to these matters is not frivolous
and that therefore a remand for an evidentiary hearing is war-
ranted.
[11] The essence of McDaniel’s defense has been that what-
ever wrong-doing he participated in with regard to the bank’s
operations was solely for the purpose of “covering up” the po-
litical machinations of the bank and its directors. There is evi-
dence in the record to support this contention. While such facts
would of course constitute no defense to the instant charges, they
lend credence to his contention that in testifying before the state
grand jury as to matters relating to the unlawful political ac-
tivity at the bank, he testified to matters related to the instant
charges. Furthermore, it is to be noted that the state charges
against McDaniel, including charges of embezzlement and mis-
appropriation of bank funds, were dismissed on the grounds
that they were covered by his testimony under the grant of im-
munity. While this state finding is not ultimately binding on the
Federal Government, it is certainly relevant to McDaniel’s prima
facie showing that he has in fact testified as to the matters here
prosecuted.
In light of the present state of the record as to the immunity
issue, the cause is remanded for an evidentiary hearing. If the
trial court finds that McDaniel testified before the state grand
so testify, the judgments shall stand, subject of course to the
right of either party to appeal as to this issue.
a
7
aa ee
[12] As to the other claims of error raised by the defendant,
we affirm the judgment, and will discuss them only briefly.
McDaniel claims that error was committed when his attorneys
were forced to turn over evidence to the federal grand jury in
response to a subpoena, which evidence fell within the attorney-
client privilege, relying on Schwimmer v. United States, 232 F.
2d 855 (8th Cir.), cert. denied, 352 U.S. 833, 77 S.Ct. 48, 1
L.Ed.2d 52 (1956). We need not determine on this record
whether or not this material was protected by the attorney-client
privilege, for we find that the error, if any, has not been properly
raised in the trial court. The record reveals that all the evidence
so seized was made available to McDanie! and his attorney prior
to trial for their inspection, and that they made photocopies of
anything they desired. If any of this evidence was thereafter
offered or used at the trial, a motion to suppress or an objection
to its admission on these grounds should have been made. A
motion to quash the subpoena could also have been made. No
such motions were made, and indeed even in this court, Mc-
Daniel does not indicate which evidence was improperly ad-
mitted because it came within the attorney-client privilege. No
reversible error has been shown in this respect.
[13] He also isa that he was denied a fair trial be-
cause, being indigent, he was not afforded adequate resources
at government expense to prepare his defense. His allegations in
this respect are most vague and general. Counsel of defendant's
own choosing was appointed by the court on April 1, 1970, and
apparently had actually been working on the case for some time
prior to that. The case did not come to trial until September 15,
1970. During this period the defendant was allowed extensive
discovery of the Government’s evidence, and all costs of dis-
covery, and trial, such as witness’ fees, subpoenas, etc., were
borne by the Government. The only specific claim of error is
that the trial court denied his request for an additional court-
appointed attorney. The record reveals that the motion for
an additional attorney was not made until only four days before
ie aaa ats ee cee Lee et eel chain Aina : TAPES
— A-61 —
the case was set for trial and that no factual showing was made
as to why a second attorney was needed at this late date. Nor
has any such showing been made in this court. There was no
abuse of discretion in the trial court’s failing to grant the motion
for a second appointed attorney.
[14] The defendant also complains that he did not receive
a fair trial because the jury was biased and prejudiced, in this
regard, he contends that the trial court erred in denying his mo-
tion for a change of venue to‘an adjoining state. The first trial
was held in Minot and no motion for a change of venue was
made as to this trial. The record reveals that most pretrial
publicity had occurred quite some time before the trial and that
any publicity which occurred shortly before the trial was due
to statements made to the press by the defendant and his at-
torney. Upon this occurrence the irial court entered an order
restricting pretrial statements. Any members of the jury panel
who indicated that they had formed an opinion on the case due
to newspaper publicity were excused for cause. No record was
made as to the extent of the pretrial publicity. We find no error
with respect to the Minot trial.
15] Immediately following the guilty verdict at the Minot
trial, defense counsel moved to have the remaining trials trans-
tcrred to Bismarck. This motion was granted and trial set for
September 15. On September 9, the defense moved for a change
of venue to another state. No intervening circumstances which
would justify this change were presented, and as before, no rec-
ord as to the pretrial publicity was made. The motion was de-
nied. We also find no error in this regard.
All other cortentions raised by the defendant have been con-
sidered and rejected as being without merit.
The case is remanded for further proceedings consistent with
this opinion.
— A-62 —
482 F.2d 305 (1973)
United States of America,
Appellant,
Vv.
Gary R. McDaniel,
Appellee.
Nos. 73-1051 to 73-1053
United States Court of Appeals
Eighth Circuit
Submitted May 18, 1973
Decided July 31, 1973
Defendant was convicted before the United States District
Court for the District of North Dakota, George S. Register, Chief
Judge, of embezzlement and misappropriation of funds and
making false entries in records of federally insured bank, and
he appealed. The Court of Appeals, 449 F.2d 832, remanded
for evidentiary hearing to determine whether defendant had
testified before state grand jury under grant of immunity and, if
so, whether testimony related to subject matter of federal prose-
cution. On remand, 352 F.Supp. 585, the District Court, Paul
Benson, Chief Judge, answered both questions in the affirmative
and vacated convictions and quashed indictments, and the Gov-
ernment appealed. The Court of Appeals, Matthes, Chief Judge,
held that in view of fact that United States attorney was unaware,
as
— A-63 —
at time he read transcript, that defendant's state grand jury testi-
mony came pursuant to grant of immunity, the Government was
confronted with insurmountable task in discharging heavy but-
den of proving that compelled testimony was used, directly or
indirectly, in subsequent federal prosecution.
Affirmed.
1. Grand Jury Key 36
Defendant, who had been subpoenaed to appear before North
Dakota grand jury investigating possible violations of state’s
Corrupt Practices Act, was not required to first invoke consti-
tutional privilege against self-crimination and then be informed
that Act conferred transactional immunity, to avoid having been
found to have appeared voluntarily and, thus, to have waived
automatic statutory protection; defendant, who did not volunteer
nonresponsive confessions in attempt to acquire immunity for
crimes not under inquiry, did not lose privilege as to any por-
tion of his testimony. NDCC 16-20-01 et seq., 16-20-10.
2. Criminal Law Key 42
Issue dispositive of whether subsequent criminal prosecution
of person who has been compelled to testify under grant of im-
munity violates constitutional privilege against self-incrimination
is not whether compelled testimony relates to subsequent charges
but whether the prosecution has used the compelled testimony in
prosecuting subsequent charges. U.S.C.A. Const. Amend 5.
*)
3. Criminal Law Key 223
Ordinarily once a defendant demonstrates that he has testified
* under a prior grant of immunity as to matters related to subse- |
quent prosecution, a pre-trial evidentiary hearing is necessary
for the Government to discharge its heavy burden of proof that
BWA seme
— ORTH VOTE AT HAR
—_ A-64 —
all of the evidence it proposed to use in subsequent prosecution
was derived from legitimate independent sources. U.S.C.A.
Const. Amend. 5.
4. Criminal Law Key 1134(2)
Even though FBI reports received by United States attorney
prior to commencement of state grand jury proceedings were
excluded from evidence by trial judge in determining whether
evidence produced at subsequent federal prosecution was de-
rived from source independent of witness’ compelled state grand
jury testimony, Court of Appeals was free to consider Govern-
ment’s offer of proof of reports as it was part of record on ap-
peal. U.S.C.A.Const. Amend. 5; Fed.Rules Civ.Proc. rule 43
(c), 28 U.S.C.A
5 Witnesses Key 304(3)
To be coextensive with constitutional privilege against self-in-
crimination, the immunity granted a witness on compelling him
to testify must forbid all prosecutorial use of such testimony, di-
rect as well as indirect, and not merely that which results in
presentation of evidence before a jury; immunized use includes
assistance in focusing investigation, deciding to initiate prosecu-
tion, refusing to plea-bargain, interpreting evidence, planning
cross-examination and otherwise generally planning trial strat-
egy. U.S.C.A.Const. Amend. 5.
6. Crimins! ‘aw Key 42
Where United States attorney was unaware that compelled
state grand jury testimony came pursuant to grant of immunity,
federal attorney could not have perceived any reason to segre-
gate witnesses’ testimony from his other sources of information;
under such circumstances Government was confronted with
bo Sate ss TSS
— A-65 —
insurmountable task in discharging heavy burden of showing
that all evidence used in subsequent federal prosecution was
derived from legitimate sources wholly independent of com-
pelled testimony; in view of inescapable conclusion that com-
pelled testimony could not be wholly obliteraved from prosecu-
tor’s mind in preparation and trial of case a finding of proscribed
use of compelled testimony was mandated and indictments were
required to be dismissed and federal conviction vacated. NDCC
16-20-01 et seq.; U.S.C.A.Const. Amend. 5.
Harold O. Bullis, U. S. Atty., Fargo, N. D., for appellant.
William R. Mills, Bismark, N. D., for appetice.
Before Matthes, Chief Judge, and Lay and Stephenson, Cir-
cuit Judges.
Matthes, Chief Judge.
We have for consideration the government's appeals from
judgments entered after an evidentiary hearing held on remand
as directed by this court on defendant's appeals from his con-
victions. See United States v. McDaniel, 449 F.2d 832 (8th
Cir. 1971), cert. denied, 405 U.S. 992, 92 S.Ct. 1264, 31 L.Ed.
2d 460 (1972). The judgments from which appeals are now
taken vacated the earlier judgments of conviction, dismissed
the indictments, ordered McDaniel discharged, and his bond
exonerated. The factual circumstances warrant detailed ex-
plication.
Defendant Gary McDaniel* was, prior to these proceedings,
President of the First Western State Bank in Minot, North Da-
kota. That bank and McDaniel apparently were for some time
engaged in irregular and illegal activities involving the bank
* Hereinafter McDonald is referred to as “defendant” or by his
surname.
)
1h te Bh dining tad ete
Distt
oon
assets. These irregularities were first discovered on or about
May 12, 1969, by state bank examiners who were soon followed
by examiners for the Federal Deposit Insurance Corporation.
Consequently, state prosecutorial authorities began investigating
the political machinations of the bank and its officers as possible
violations c¢ North Dakota’s Corrupt Practices Act, 3 N_D.
C.C. § 16-20-01 et seq.; and the United States Attorney for the
District «i North Dakota began investigating the personal
manevverings of the bank officers for the purpose of determin-
ing whether federal criminal statutes had been violated.
On September 23, 1969, defendant, who was then residing
in the state of Minnesota, was subpoenaed to appear before a
federal grand jury at Fargo, North Dakota, on Ociober 7,
1969. He appeared, but claimed his privilege against self-in-
crimination, and gave no testimony. McDaniel went from the
grand jury room to the United States Attorney’s office, where
the local sheriff immediately served him a subpoena .o appear
before a state grand jury at Minot, North Dakota, on October
15, 1969.
Prior to his appearance before the state grand jury, defend-
ant sought, in exchange for his testimony, immunity from prose-
cution under 6 N.D.C.C. § 31-01-09 (Supp.1971), which was
denied. Defendant’s attorney then discovered 3 N.D.C.C. § 16-
20-10, which provides in pertinent part:
“No person shall be excused from attending and testify-
ing . . . before any court upon any investigation . . . for a
violation of . . . section 16-20-08, upon the ground that
the testimony or evidence, documentary or otherwise, re-
quired of him may tend to incriminate . . . him. No per-
son shiall be prosecuted nor subjected to any penalty or
forfeiture for or on account of any transaction, matter or
thing concerning which he may testify or produce evi-
—-e—
McDaniel’s attorney realized that this statute automatically
conferred transactional immunity upon any witness subpoenaed
to testify in an investigation under the North Dakota Corrupt
Practices Act, and accordingly he advised McDaniel to appear
before the state grand jury and fully divulge all his illegal
actions.
That the state prosecutors were unaware of this automatic
immunity statute is evidenced by the fact that they subpoenaed
all potential defendants, thereby immunizing every suspect ¢x-
cept the bank itself, and by the fact that they expressly granted
immunity to one grand jury witness under the more recent
statute, § 31-01-09.
In any event, McDaniel appeared at the state grand jury and
gave self-incriminating testimony filling three volumes of tran-
script. On November 6, 1969, the United States Attorney
requested a copy of McDaniel’s testimony from an Assistant
State Attorney General, which he received the late afternoon
of November 20. Since the United States Attorney too appar-
ently was unaware that McDaniel’s testimony was protected by
a statutory grat of immunity, ne read the three volumes of
transcript and then returned them the next morning.
Thereafter, on December 8, 1969, McDaniel was indicted
by the state on fifteen counts of violating the Corrupt Practices
Act, one count of embezzlement, and three counts of making
false entries.
Federal indictments were returned on February 4 and July
31, 1970. The four counts of the initial federal indictment
dealt with the of the Ranger Bar, a cocktail lounge.
Three of these ts charged that McDaniel had violated 18
U.S.C. § 656 in that he had embezzied and misapplied $56,-
637.20 to finance the transaction by issuing cashier's checks
from the bank in that amount without repaying the bank. The
— A-68 —
fourth count charged a violation of 18 U.S.C. § 1005, alleging
that, to cover the issuance of the cashier’s checks, McDanicl
had made a false entry in the bank records showing as an asset
a nonexistent deposit with another bank.
The seven counts of the second federal indictment dealt with
miscellaneous schemes. In four counts, McDaniel was charged
with embezzling and misapplying $44,716.90 by issuing two
checks without repaying the bank, converting a third check
to his personal use, and issuing a fourth on a fundless account,
all in violation of § 656, supra. The final three counts alleged
that McDaniel had further violated § 1005 by making three
separate false entries of fictitious deposits by the bank to show
assets to cover the sums embezzled.
McDaniel sought to have all state and Federal indictments
quashed on the ground that the Fifth Amendment precluded
his prosecution for transactions touched upon by his immunized
State grand jury testimony. The state court, Judge Coyne, ac-
cepted the argument that § 16-20-10 conferred transactional
immunity and quashed the state indictment; but the federal
court, Judge Register, declined to quash the federal indictments.
Consequently, McDaniel was tried in federal court in two trials,
convicted on all eleven counts, and sentenced to five years im-
prisonment on one conviction and concurrent terms of three
and two years on the others.
McDaniel then appealed tc this court, and at oral argument
on that appeal the United States Attorney conceded that he
had read McDaniel’s state grand jury testimony on the evening
of November 20, 1969. This court held that the United States
Attorney’s reading of McDaniel’s state grand jury testimony
“constitutes a prima facie ‘use’” of it, and therefore, if that
testimony was given under a grant of immunity, and if it related
to the subject matter of the federal prosecutions, McDaniel
could not be prosecuted for those transactions. United States
— A-69 —
v. McDaniel, supra. Accordingly, the cause was remanded to
the district court for an evidentiary hearing to determine
whether McDaniel had testified under a grant of immunity, 449
F.2d at 840, and, if so, whether the testimony related to the
subject matter of the federal prosecution. 449 F.2d at 841.
After conducting the mandated evidentiary hearing, Judge
Benson answered both propounded questions affirmatively and
therefore, in accordance with his conception of our opinion,
vacated the convictions and quashed the indictments. 352 F.
Supp. 585.
However, Judge Benson’s task at the evidentiary hearing was
complicated by the intervening decision of the Supreme Court
in Kastigar v. United States, 406 U.S. 441. 92 S.Ct. 1653, 32
L.Ed.2d 212 (1972).
This court’s prior opinion in McDaniel I, authored by Judge
Gibson, had interpreted the pre-Kastigar decisions of the Su-
preme Court to establish a double standard with respect to the
constitutionality of statutes which grant immunity to witnesses
in order to compel testimony. First, this court determined that
Counselman v. Hitchcock, 142 U.S. 547, 12 S.Ct. 185, 35 L.
Ed. 1110 (1892), applied full transactional immunity when the
federal government was both the questioning sovereign and the
prosecuting sovereign, thereby preventing federal prosecution
for any crime relating to the subject matter of the compelled
testimony. If, on the other hand, the questioning sovereign
were the state, Murphy v. Waterfront Commission, 378 U.S.
. $2, 84 §.Ci. 1594, 12 L.Ed.2d 678 (1964), governed, and the
federal government was permitted to prosecute the witness for
crimes related to his testimony, so long as there was no use of
the compelled testimony or its fruits. Thus we ruled that, in
inter-jurisdictional cases, the Fifth Amendment required no
more than use and derivative use immunity, even while single
jurisdictions were bound by full transactional immunity.
12S LAR SONI A PIA GLE ORIG CLLR AES POE AE ETT
;
—~
By means of this analysis, it was determined that under
ordinary circumstances McDaniel would only be entitled to use
immunity, since kis grand jury testimony had been com-
pelled by the state, and the federal government was acting as
prosecutor. However, because the United States Attorney had
read the three-volume transcript of McDaniel’s testimony, our
court felt forced to conclude that the federal government was
in the same position as if it were the questioning sovereign, and
that therefore transactional immunity applied. The only ques-
tion then remaining was whether McDaniel had in fact testified
before the state grand jury a grant of immunity to mat-
ters related to the prosecution, and, as seen, that caused the
remand.
In Kastigar, of course, Cy Court held that use and
derivative use immunity is constitutionally sufficient to compel
testimony over a claim of Fifth Amendment privilege even in
cases in which the federal government is both questioner and
prosecutor. Accordingly, at the evidentiary hearing in this case,
the government sought to open a third issue by seeking to prove
under the Kastigar guidelines that it had independent sources
for the evidence it used to convict McDaniel. For this purpose,
it offered into evidence F.B.I. reports based upon an investiga-
tion of McDaniel that had been received by the United States
Attorney’s office prior to McDaniel’s testimony. But McDaniel’s
counsel objected to this evidence on the ground that this court's
mandate did not allow the trial court to explore that issue. The
district court sustained this objection, and excluded the reports
from evidence, admitting them only as an offer of proof. Never-
theless, in his memorandum dismissing the indictments, the dis-
trict judge observed that could he apply Kastigar his result
would differ:
“On the basis of the government's offer of proof in the
McDaniel evidentiary hearing, this Court finds that the
government had, prior to the grand jury testimony, all the
ts <2 EE RT SFMT Rr ee oe -e ~_
-
— Nl —
evidence used in the McDaniel prosecution, and further
finds that evidence was derived from legitimate sources
wholly independent of the compelled testimony. This evi-
dence consists of comprehensive investigative Federal Bu-
reau of Investigation reports. See Government's Offer of
Proof, Exhibits 36-41 inclusive.”
It is with this extensive and complicated factual background
that we consider the government's three contentions on appeal:
(1) that McDaniel’s testimony was not given under a grant of
immunity; (2) that the testimony did not relate to the subject
matter of the federal prosecution; and, alternatively, (3) that
the United States did not “use” that testimony to convict Mc-
Daniel.
[1] First the government contests Judge Benson's conclusion
of law that when McDaniel testified before the state grand jury
pursuant to a subpoena, he was automatically granted immunity
by § 16-20-10. The government's position tacitly concedes
that, ordinarily, the statute automatically confers immunity on
any witness subpoenaed to testify upon an investigation of vio-
lations of § 16-20-08, but contends that since McDaniel seized
this opportunity to gain absolution of his wrongs, he waived —
the immunity. The essence of this argument is the contention
that unless McDaniel first invoked the Fifth Amendment and
then was told that § 16-20-10 granted him immunity, he was
acting voluntarily and thus waived the statutory protection. But
the Supreme Court has held precisely to the contrary in a case
involving a federai statute worded similarly to § 16-20-10. See
United States v. Monia, 317 U.S. 424, 430, 63 S.Ct. 409, 87
L.Ed. 376 (1943). Accord, State v. Hennessey, 195 Or. 355,
245 P. 2d 875, 881 (1952) (en banc). Furthermore, it is not
contended that McDaniel lost the privilege as to any portion of
his testimony by volunteering nonresponsive confessions in an
attempt to acquire immunity for crimes not under inquiry. Cf.
United States v. Wilmington Chemical Corp., 254 F.Supp. 92
a
— A-72 —
~
(N.D. Ill. 1966). Accordingly, we find no error in Judge Benson’s
conclusion that McDaniel’s testimony was covered by a grant
of immunity.
[2] The government’s second contention faults Judge Ben-
son’s finding of fact that McDaniel’s testimony “related to” the
federal prosecution. However, this inquiry, which was man-
dated by this court’s earlier remand, is, in light of Kastigar, no
longer germane. Because we held transactional immunity to be
required by the Fifth Amendment, it was necessary under our
earlier opinion to inquire whether the indictment had to be
quashed on grounds that the testimony “related to” the transac-
tion giving rise to the prosecution. But under Kastigar, that no
longer is a basis for quashing the indictment. The question under
Kastigar is not whether the testimony relates to the charges,’ ~
but whether the prosecution has “used” the testimony in prose-
cuting those charges. It is to that dispositive question that we
turn.
In writing for the Court in Kastigar, Mr. Justice Powell
equated the protection provided by the statute in question with
the protection provided by the Fifth Amendment and held that
the
1 Even if the question were whether the testimony related to the
federal charges, we think that the following finding by Judge Benson
would nei d: clearly erroneous.
“Alter reading the entire grand jury transcript, it is this court's
findixg that testimony discernably be separated from ma-
terial incriminating to McDaniel. Alli counts are in some way
connected to the shortage of $214,900 [which McDaniel ex-
plained to the grand jury}.
Taken as a whole, the 472 pages of grand jury testimony im-
plicate McDaniel in every aspect of the various schemes. The
insignificance appears only when a line or page is viewed as a
complete unit.
We note that in support of this conclusion the trial court meticu-
lously set out in its memorandum opinion each count of the two
federal indictments, coupled with a summary
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