The opinion of the court was delivered by: PENN
JOHN GARRETT PENN United States District Judge
This case comes before the Court on the motion of Thomas J. Ward for an order quashing the appointment of two government attorneys as Commissioners to gather documents, testimony, and other information as requested by the Crown Prosecution Service of the United Kingdom. Mr. Ward also requests this Court to quash the subpoenas issued by the Commissioners. Alternatively, he seeks a protective order limiting the disclosure and use of the documents, testimony and other information gathered by the Commissioners to prevent the abuse of the authority under which they have been appointed.
The motion was argued on March 10, 1988.
The background of this motion is as follows: In May 1987, Ernest Walter Saunders was arrested by British authorities and charged with "attempting to pervert the course of justice and destruction and falsification of documents." Based on those charges, the Director of Public Prosecutions of the Crown Prosecution Service was "conducting criminal proceedings" against Mr. Saunders as of September 30, 1987. In connection with those proceedings, an investigation of Mr. Saunders' involvement in an alleged illegal share support scheme was commenced. Saunders was the former Chief Executive of Guinness, PLC (Guinness). It was alleged that Saunders inflated the price of Guinness stock by fraudulently enhancing investor demand for it. The enhanced demand came from Guinness insiders who were encouraged to buy large quantities of stock by Saunder's promises of full compensation, from company funds, for any losses that would be incurred. Apparently, due to its high stock price, Guinness had sufficient economic leverage to outbid Argyll, PLC, in their competition for a hostile takeover of the Distillers Company. After Guinness' successful acquisition of Distillers Company, however, the price of Guinness stock dropped, thus requiring Mr. Saunders to pay the losses of the Guinness insiders out of company funds.
The British authorities have allegedly identified two payments evidencing criminal conduct: (1) A May 29, 1986 payment of 3,000,000 British pounds by Guinness to Sir Isadore Jack Lyons, and (2) a payment of 5,200,000 British pounds by Guinness to Thomas J. Ward, the movant herein. Both Lyons and Ward were insiders at Guinness; Lyons as a consultant to Guinness, and Ward as a director of Guinness, an officer and director of several subsidiaries of Guinness, and counsel to Guinness and its subsidiaries.
It appears that Lyons has sought to explain part of the Guinness payment to him by claiming that Guinness was buying his cooperative apartment and parking space at Watergate South, 700 New Hampshire Ave., N.W., Washington, D.C., for 750,000 British pounds. This real estate was conveyed in late 1985 or early 1986, but the transferee of record was Ward, not Guinness. Lyons and Guinness contend that Ward is a nominee holder for Guinness. Guinness has filed a civil suit against Ward in this court
to recover the property, and Ward is defending the case on the basis that he, and not Guinness, is the true owner.
As a part of the investigation of the "illegal support scheme" the Crown Prosecution Service, by Crown Prosecutor F. J. Coford, petitioned the "competent Judicial authorities" in the United States for assistance with respect to four American witnesses on or about September 30, 1987. The petition, which was captioned "Commission Rogatoire," was apparently routed to the British Embassy in Washington. By diplomatic note dated October 19, 1987, the British Embassy in Washington forwarded the Commission Rogatoire (hereinafter refered to as the "Letter of Request") to the Department of State. The Department of State processed the Letter of Request on or about October 22 or 23, 1987, and forwarded it to the office of International Affairs in the Criminal Division of the Department of Justice on or about November 16, 1987. That office in turn routed the Letter of Request to the United States Attorney's Office for the District of Columbia on or about January 5, 1988.
On January 20, 1988, the United States Attorney, by Assistant U.S. Attorney Robert R. Chapman, applied ex parte to this Court for an order appointing Mr. Chapman, and Mr. John E. Harris, Associate Director, Office of International Affairs, Criminal Division, United States Department of Justice, as Commissioners of the Court pursuant to 28 U.S.C. § 1782. Such an order was entered by the Court on January 21, 1988. It is this Order which is the subject of the pending motion.
In the Letter of Request, it is stated that under the provisions of the Prosecution of Offenses Act 1985, the Director of Public Prosecutions is required to take over the conduct of all criminal proceedings in England and Wales, other than certain relatively minor offenses, instituted on behalf of a police force. It notes that the Director of Public Prosecutions is conducting a criminal proceeding against Mr. Sanders, who is presently charged with "attempting to pervert the course of justice and destruction and falsification of documents." The Letter sets forth a number of the allegations, but relevant to this case, it states that "payment was made to Mr. Thomas Ward a director of Guinness by Saunders in the sum of 5,200,000 pounds. Ward is an American citizen and a partner in the law firm of Ward, Lazarus, Grow and Cihlar, 1711 N Street, N.W., Washington, D.C." Apparently, at the center of this part of the investigation is the ownership of the Watergate Apartment. In order to carry out their investigation, the Commissioners seek to secure information from (1) Watergate South, Inc., (2) Hogan & Hartson, a law firm which allegedly represented Lyons in relation to the sale of the property at the Watergate Apartments, (3) Cafritz Co., the company which is believed to be the manager of the Watergate Apartments and (4) Bain and Company, Inc. which allegedly has information concerning the process of payments to Lyons of his fee and remuneration. The Letter notes that at this stage "the persons listed above are not suspected of complicity in any criminal offenses and they will be treated as potential prosecution witnesses."
Ward moves to quash the subpoena, and for other relief, because he contends that the United Kingdom's Letter of Request does not satisfy the requirements of 28 U.S.C. § 1782. He argues that the Letter was not signed, authorized or sent on behalf of a court conducting the proceedings or any other British court or judge, and that it does not seek to gather evidence to be used in the Saunders proceedings before the British criminal court. He argues that "the request impermissibly seeks assistance for the British police and prosecutor in its continuing criminal investigation, primarily or exclusively of Mr. Ward." He further alleges that the Letter of Request and the Government's application for an order permits a gross misuse and abuse of the information collected here.
The appointed Commissioners at first argued that Ward lacked standing to move to quash the subpoena entered in this case. At the oral argument, however, the Commissioners conceded standing and addressed the motion on its merits. At this time the primary issue raised by the parties is whether under Section 1782 there is a requirement that there be a pending proceeding in a foreign or international tribunal. While at one point Ward also appeared to argue that the request had not been made by a foreign or international tribunal, he apparently is not making that argument; perhaps in view of the statute which provides ...