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.
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 Government charges that the defendants, willfully and knowingly, conspired to violate and violated Section 1001 by making and using false applications, balance sheets and financial statements in order to qualify for the purchase of vessels. The Government has alleged that the applications were false in that defendant Victory Carriers was represented as meeting the citizenship requirements of Section 2 of the Shipping Act of 1916, whereas in fact the corporation was under alien control. The Government has alleged that the balance sheets and financial statements were false in that the cash balance was reported to be greater than it really was.
Defendants have moved to dismiss and have moved for a bill of particulars. The grounds alleged in support of their claims are similar except that certain defendants assert, as an additional ground in their motion to dismiss, that they are entitled to immunity from prosecution under the Fifth Amendment and by virtue of Section 28 of the Shipping Act of 1916, 46 U.S.C.A. § 827, which is an immunity provision. These defendants are Nicolas Cokkinis, Joseph E. Casey, Joseph H. Rosenbaum, Robert W. Dudley, Harold O. Becker and Charles Augenthaler. The claims of immunity will be considered first. The claim of immunity by Charles Augenthaler, having a different basis than that of the others, will be considered separately.
'No person shall be excused, on the ground that it may tend to incriminate him or subject him to a penalty or forfeiture, from attending and testifying, or producing books, papers, documents, and other evidence, in obedience to the subpoena of the commission or of any court in any proceeding based upon or growing out of any alleged violation of this chapter; but no natural person shall be prosecuted or subjected to any penalty or forfeiture 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, except that no person shall be exempt from prosecution and punishment for perjury committed in so testifying.'
The defendants claim that they are entitled to immunity under Section 28 because they 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 that their testimony was concerning the subject matter of the present indictment. The defendants testified before a grand jury impaneled in the District of Columbia on September 2, 1952. That grand jury returned the indictment in this case.
The sole purpose of immunity 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. 376 and in Smith v. United States, 1949, 337 U.S. 137, 69 S. Ct. 1000, 93 L. Ed. 1264.
Further discussion here is inappropriate. 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,
while at the same time providing safeguards against their misuse.
With this in mind we come to consideration of defendants' claims of immunity.
Two questions are presented: (A) Is Section 28 applicable to the Grand Jury proceeding before which the defendants testified? and (B) Are the defendants entitled to its protection?
A. Is Section 28 Applicable to the Proceeding Before Which the Defendants Testified?
The language in Section 28 makes it applicable in 'any proceeding based upon or growing out of any alleged violation of this chapter'. The Government claims that the proceeding was not based upon nor did it grow out of alleged Shipping Act violations, but rather was limited to inquiry of possible violations of 18 U.S.C. § 371 and 18 U.S.C. § 1001 which contain no immunity provision. In support of this the special assistant to the Attorney General who was in charge of the proceeding has submitted his letter of authority for that special grand jury. The letter only makes reference to possible violations of 18 U.S.C. § 371 and § 1001. And, of course, the indictment which that grand jury returned was brought under these sections only. The Government further argues that the subject matter of that inquiry was not related to Shipping Act violations, but only concerned possible false applications, balance sheets, and financial statements submitted to the Commission for the purchase of vessels, and that the procedure for the sale of the surplus vessels was covered only by the Merchant Ship Sales Act of 1946, which contains no immunity provision. Specifically, the Government claims that the defendants were examined only as to the applications, balance sheets and financial statements and were not questioned as to any matter based upon or arising out of Shipping Act violations.
The question is what comprises a 'proceeding based upon or growing out of any 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 seen. 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, Counselman v. Hitchcock, 1892, 142 U.S. 547, 12 S. Ct. 195. 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. Such a result would indeed thwart the purpose of immunity provisions.
In United States v. Goldman, D.C.Conn, 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 nature of the 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 a person 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- § 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. The 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 affirmed. 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 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, 227, 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.
We now consider the subject matter of the proceeding before which the defendants 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 the defendants 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 although 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, up to 49% of the stock was owned by aliens. It was claimed that the aliens had made loans to the corporations, or had otherwise facilitated the requisite financing, and had in some instances paid a higher price for their shares than that paid by American citizens. There was some question as to whether 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, 7 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 as to whether certain corporations qualified as citizens under Section 2. United States Petroleum Carriers, Inc., and Victory Carriers, Inc., defendants in the present proceeding, were named, The question of how Section 2 should be interpreted was not resolved by the Maritime Administration.
Consideration of the Administration's interpretation of Section 2 is not, however, relevant here. It is sufficient to note for purposes here that the status of corporations named as defendants in the present case was then of concern.
The Administration subsequently conducted a field investigation to determine whether certain corporations were controlled by aliens. It appears from a summary of its report that the investigation related to whether certain corporations were citizens within the meaning of Section 2.
The report was transmitted to the Attorney General on January 15, 1951, for his consideration as to possible violations of the Shipping Act of 1916, 46 U.S.C.A. § 801 et seq.
Subsequently, the Senate Permanent Sub-committee conducted an inquiry into the sale of the surplus vessels. It held 14 public meetings from February 18, 1952, to March 14, 1952, and issued its Interim Report on May 28, 1952.
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 those named was the United States Petroleum Carriers, Inc.
The Report further states that on June 15, 1951, the Secretary of Commerce sent copies of the reports to the Attorney General with a request that the reports be studied with a view toward determining whether or not certain of the transactions involved civil fraud on the United States, and whether or not certain criminal statutes of the United States had been violated. In this connection particular reference was made to the following provisions of the United States Code: 18 U.S.C. § 1001 and Sections 9, 37, 40 and 41 of the Shipping Act of 1916.
The foregoing investigations have resulted in civil as well as criminal proceedings.
On the civil side, the Justice Department has seized and filed libels of information for forfeiture against a number of vessels owned by some of the corporations under investigation, including vessels owned by the United ...