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UNITED STATES v. NIARCHOS

September 9, 1954

UNITED STATES of America,
v.
Stavros NIARCHOS, Ambrose Capparis, George Trypanis, George Emmanuel, Constantine Emmanuel, alias Costa Emmanuel, Mary Dracopoulos, David R. Dorn, Robert A. Murphy, Compania Internacional de Vapores Ltda., a corporation, North American Shipping and Trading Company, Inc., a corporation, Delaware Tanker Corporation, a corporation, Joseph E. Casey, E. Stanley Klein, Julius C. Holmes, American Overseas Tanker Corporation, a corporation, Defendants



The opinion of the court was delivered by: YOUNGDAHL

This is one of a series of cases arising out of the disposition of surplus vessels after the Second World War. At that time there were many surplus vessels which had been built to carry supplies and troops. As a result Congress passed The Merchant Ship Sales Act of 1946, 50 U.S.C.A.Appendix, § 1735 et seq., which gave authority to the Maritime Commission to sell the vessels and set a price formula for the Commission to follow in selling them. The Act is merely directory to the Commission. It contains no penal provisions. Among other things the Act provides that preference in the sale of the surplus vessels shall be given to citizens of the United States, 50 U.S.C.A.Appendix, § 1740, and adopts the definition of citizenship appearing in Section 2 of the Shipping Act of 1916 as amended. *fn1" Suspicion arose that some alien purchasers were misrepresenting their citizenship in order to obtain vessels, and on terms as favorable as those given to citizen purchasers. An investigation was initiated. It has resulted in thirteen indictments against an aggregate of ninety-one defendants on the criminal side, and libel proceedings against many of the vessels on the civil side.

The present indictment arose from the following alleged facts. On December 19, 1947, defendant American Overseas Tanker Corporation, (AOTC), contracted to purchase five vessels from the Commission. AOTC wanted to transfer the vessels to Panamanian registry and flag. Under Section 9 of the Shipping Act of 1916, approval of the Commission is required before a vessel can be placed under foreign registry or flag. *fn2" And, Section 41 of the Shipping Act of 1916 provides that whenever approval of the Commission is required by Section 9, the approval may be given either absolutely or upon such conditions as the Commission prescribes. *fn3"

 In the contract of December 19, 1947, the Commission gave its approval, as required by Section 9, to the transfer of each vessel to Panamanian registry and flag. However, as authorized by Section 41, the Commission attached a condition to its approval. The condition was: 'The Buyer agrees that, with respect to each vessel, the American citizen ownership and Panamanian registry of the vessel shall not be changed without prior approval of the Commission, and that if in the judgment of the Commission the national interest so requires, the Buyer shall return the vessel to documentation under the United States flag'.

 Defendants have been indicted for violation of Sections 9 and 41 of the Shipping Act of 1916 and under 18 U.S.C. § 371 for conspiracy to violate these Sections. Section 41 makes it a crime to violate a condition attached to approval under Section 9. The Government alleges that the condition was in fact violated by the sale of the stock in AOTC to alien interests which did not satisfy the citizenship requirements in Section 2 of the Shipping Act of 1916. Section 9 makes it a crime to transfer vessels to foreign registry or flag without approval of the Commission. The Government also alleges that under Section 41 a result of violating the condition is to treat the original transfer to Panamanian registry and flag as though it had been done without the approval of the Commission, thereby causing a violation of Section 9.

 The cases against all but defendants Joseph E. Casey, E. Stanley Klein and Julius Holmes have been disposed of. This concerns motions by defendants Casey and Klein to dismiss and by Casey to inspect the minutes of the grand jury. The grounds forwarded by each defendant in his motion to dismiss are similar except that Casey presents, as an additional ground, that he is immune from prosecution under the Fifth Amendment and Section 28 of the Shipping Act of 1916, 46 U.S.C.A. § 827. This claim of immunity will be considered first.

 Immunity

 Section 28 provides:

 Casey claims that he is entitled to immunity under Section 28 because he testified, under subpoena, before a grand jury in a proceeding 'based upon or growing out of' alleged violations of the Shipping Act of 1916, and because his testimony was concerning the subject matter of the present indictment.

 Casey testified before a grand jury impaneled in the District of Columbia on September 2, 1952. That grand jury subsequently indicted Casey in Criminal No. 1647-53. However, at the time of his testimony, Casey was already named as a defendant in the present case under a sealed indictment. It is clear at the outset that Casey's rights, whatever they are, under Section 28 are not diminished by the fact that he was already under indictment at the time of his testimony. The language of the immunity provision is clear that a person shall not 'be prosecuted' 'for or on account of any transaction, matter, or thing' as to which he may testify. The protection of immunity provisions is to prosecution and not to indictment. As is indicated hereafter, the immunity provision would be ineffective if it did not apply to indictments already returned and in which the witness was named as a defendant.

 The only purpose of immunity provisions is to compel evidence that is otherwise not obtainable because of the Fifth Amendment privilege against self-incrimination. The history of immunity provisions has been recently considered in United States v. Monia, 1943, 317 U.S. 424, 63 S. Ct. 409, 87 L. Ed. 306 and Smith v. United States, 1949, 337 U.S. 137, 69 S. Ct. 1000, 93 L. Ed. 1264. Further discussion here is inappropriate. *fn4" It is sufficient to note that this history has simply been the process of making the immunity provisions effective by giving a witness the full protection to which he is legally entitled under the Fifth Amendment, *fn5" while at the same time providing safeguards against their misuse. *fn6" With this in mind we come to a consideration of Casey's claim of immunity.

 Two questions are presented: (A) Is Section 28 applicable to the proceeding before which Casey testified? and (B) Is Casey entitled to its protection?

 A. Is Section 28 Applicable to the Proceeding Before Which Casey Testified?

 The question is what comprises a 'proceeding based upon or growing out of alleged violations of this chapter'.

 The test clearly cannot be that the indictment must be brought under the Shipping Act or whatever act contains an immunity provision. The result of a special grand jury investigation often indicates violations of different or additional laws than those on which the proceeding was initially 'based'. The words 'growing out of' must be given their common sense meaning. The undesirable consequence of the test the Government suggests is easily seem. Assume that a witness' compelled testimony indicated possible violations of Act A, which has an immunity provision, and Act B, which does not. The Government then prosecutes the witness under Act B arguing that the proceeding, as seen by the indictment, was one neither based upon nor growing out of alleged violations of Act A. If the Government's argument were successful the immunity provision in Act A would be unconstitutional since its protection was not as broad as that which the witness was legally entitled to under the Fifth Amendment. *fn7" Consequently the witness could refuse to testify in spite of the immunity provision, and accordingly, a witness could refuse to testify whenever his testimony would indicate a possible violation of an act containing no immunity provision. Indeed such a result, by making immunity provisions unconstitutional, and therefore justifying a witness' refusal to testify, would thwart the possibilities of compelling testimony.

 The requirements of the Fifth Amendment, as suggested above, and the phrasing of the immunity statutes 'but no natural person shall be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing * * * he may so testify or produce evidence' seem to require that a witness is immune under any statute relevant to his testimony without regard to whether the statute contains an immunity provision. The cases also support the conclusion that the proper test for determining the nature of the proceeding for purposes of an immunity provision is the nature of its subject matter. *fn8"

 In United States v. Goldman, D.C., 1928, 28 F.2d 424, two defendants were indicted for conspiracy to violate the National Prohibition Act, 27 U.S.C.A. § 1 et seq. after having testified before a grand jury investigating violations of that Act. The Act contained an immunity provision similar to Section 28. The court sustained a plea in bar noting that the language of the immunity provision, for or on account of any transaction, matter or thing as to which in obedience to a subpoena and under oath, he may so testify or produce evidence,

 
'Without doubt, shields the witness from any criminal prosecution involving the same subject-matter, regardless of the specific statute upon which the indictment is predicated. * * * Poor indeed, and derisively delusive, would be the protection afforded by section 30 of the National Prohibition Act, if its amnesty extended no further than to inhibit prosecutions formally based upon some section of the Act.' 28 F.2d at page 433.

 The holding of the Court seems clear that the test of the nature of a proceeding is determined by its subject matter and not the statute under which the indictment is returned.

 A similar situation was presented in United States v. Andolschek, 2 Cir., 1944, 142 F.2d 503. Andolschek appeared before a grand jury which subsequently indicted him for conspiracy to violate 26 U.S.C.A. Internal Revenue Code § 4047(e). An immunity provision in 26 U.S.C.A.Int.Rev.Code, § 3119 extended immunity to persons testifying in any suit or proceeding based upon or growing out of an alleged violation of 26 U.S.C.A.Int.Rev.Code, § 3100 and § 3124, not including § 4047(e). The indictment was dismissed as to Andolschek. Judge Learned Hand noted:

 
'The indictment was, it is true, for a conspiracy to violate § 4047(e) of 26 U.S.C.A.Int.Rev.Code, and not any of those sections ( § 3100-3124) for which § 3119 grants immunity. Nevertheless, the events laid in the indictment as the substance of the conspiracy, were a crime under § 3115(a), as well as under § 4047(e)'. 142 F.2d at pages 505-506.

 The same principle is illustrated in United States v. Weinberg, 2 Cir., 1933, 65 F.2d 394, certiorari denied 1933, 290 U.S. 675, 54 S. Ct. 93. There the grand jury sought to question the defendant concerning violations of the National Prohibition Act. Defendant refused to answer certain questions on the ground that the immunity provision of the National Prohibition Act would not protect him against subsequent prosecution for violation of the Internal Revenue laws. The witness was prosecuted for contempt. At the trial the judge again posed the questions and Weinberg again refused. Weinberg was judged in contempt and the judgment was confirmed. The Court of Appeals said that though the trial judge could not guarantee the witness absolute assurance of immunity from prosecution under the tax laws, he properly stated that Weinberg could not be prosecuted for any crime as to which he had given evidence.

 The question as to the necessary breadth of an immunity provision was precisely raised in the first case testing their constitutionality. Counselman v. Hitchcock, 1892, 142 U.S. 547, 12 S. Ct. 195. The Court held that the immunity provision was not an adequate substitute for the protection guaranteed by the Constitution, saying that in order to be valid, an immunity provision 'must afford absolute immunity against future prosecution for the offense to which the question relates.' 142 U.S. at page 586, 12 S. Ct. at page 206. Consequently, subsequent immunity statutes have been drawn in broader terms usually containing the language (as that in Section 28) that a person who testifies is protected from prosecution 'for or on account of any transaction, matter, or thing as to which * * * he may so testify or produce evidence.'

 As suggested by Mr. Justice Holmes in Heike v. United States, 1913, 227 U.S. 131, 142, 33 S. Ct. 226, 228, an immunity provision 'should be construed, so far as its words fairly allow the construction, as coterminous with what otherwise would have been the privilege of the person concerned.' Indeed immunity provisions should be, and as the cases indicate, have been construed to effectuate their purpose. Consequently the objective subject matter test must prevail. *fn9"

 Next we consider the subject matter of the proceeding before which Casey testified. A knowledge of its background is helpful. As stated at the outset, this is one of a series of cases arising out of the disposition of surplus vessels after the Second World War. The cases arose out of what is editorially referred to as the 'Shipping Investigation'. The proceeding before which Casey testified also arose out of that investigation.

 In disposing of the surplus vessels, the Commission sold some of the vessels to corporations whose citizenship status was under suspicion. It was believed that, though these corporations had an American president and American directors, and at least 51% of the stock was owned by persons who were citizens of the United States, aliens owned up to 49% of the stock, had made loans to the corporations, or had otherwise facilitated the requisite financing. In some instances it was believed that aliens had paid a higher price for their shares of stock than the price paid by American citizens. There was some question as to whether or not such corporations met the citizenship requirements of Section 2 of the Shipping Act of 1916.

 In 1950, the Maritime Administration, a successor agency to the Maritime Commission, *fn10" appraised the policies as to the criteria used to determine whether a corporation qualified as a citizen under Section 2. An opinion was rendered by the general counsel for the Maritime Administration with particular reference to whether certain corporations qualified as citizens under Section 2. United States Petroleum Carriers, Inc., and Victory Carriers, Inc., whose indictments in Criminal No. 1647-53, United States v. Onassis, D.C., 125 F.Supp. 190 resulted from the proceeding before which Casey testified, and North American Shipping and Trading Company, Inc., a defendant in the present proceeding, were named. The question of how Section 2 should be interpreted was not resolved by the Maritime Administration. *fn11" Consideration of the Administration's interpretation of Section 2 is not, however, relevant here. It is sufficient to note for the purposes here that the status of corporations named as defendants in Criminal No. 1647-53 and the present case was then of concern.

 Subsequently, the Senate Permanent Sub-committee conducted an inquiry into the sale of the surplus vessels. It held fourteen public meetings from February 18, 1952, to March 14, 1952, and issued its Interim Report on May 28, 1952. *fn14" This Report states that the inquiry, together with related matters, had been under investigation by the Maritime Administration since late in 1950, and that by June of 1951, the agency had prepared a series of investigative reports dealing with the activities of several companies. Among ...


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