PALMIERI, Senior District Judge:
The indictment containing seventeen counts (Davis having been named in fourteen) charged Davis and three co-defendants with various charges arising out of a scheme contrived and executed during the years 1973-1978 which involved the payment of multi-million dollar kickbacks to executives of General Dynamics Corporation in return for the approval of subcontracts awarded by General Dynamics to
The Government's evidence can be deemed to support jury findings to the following effect: During the 1970's, Davis was a Senior Vice President of Frigitemp, which acted as a subcontractor on major commercial and naval shipbuilding projects. From 1973 to 1977, Frigitemp was awarded over $44 million in subcontracts from two shipbuilding divisions of General Dynamics Corporation, the Quincy Shipbuilding Division ("QSD") in Quincy, Massachusetts, and the Electric Boat Division ("EB") at Groton, Connecticut. In return for the award of these subcontracts, Frigitemp paid $2.7 million in kickbacks to two key executives of General Dynamics responsible for approving the award of the subcontracts: P. Takis Veliotis, President and General Manager of QSD until 1977 and General Manager of EB after 1977, and James H. Gilliland, Veliotis' principal assistant at QSD.
The principal actor in the scheme was Davis, who first proposed the payment of kickbacks to Veliotis and Gilliland. A fund of over $5 million to pay the kickbacks was devised by Davis by creating and submitting to Frigitemp for payment a series of fictitious "consulting contracts" and materials invoices in the names of sham Cayman Island corporations, for non-existent consulting services and raw materials.
Davis also organized and supervised the laundering of the kickback fund through an elaborate network of bank accounts in the United States, Canada, the Cayman Islands and Switzerland, and carried out the actual payment of the kickbacks through a series of wire transfers to secret numbered Swiss bank accounts of Veliotis and Gilliland. In the course of carrying out the kickback scheme, Davis secretly diverted nearly half of the $5 million fund to himself.
Davis' co-defendant Gerald E. Lee, chief executive officer of Frigitemp, pleaded guilty to the racketeering conspiracy charge and a conspiracy charge contained in a second indictment, testified at trial, and was sentenced by Judge Conner to concurrent sentences of 18 months imprisonment. The other two co-defendants, James H. Gilliland and P. Takis Veliotis, became fugitives so that Davis stood trial alone.
Davis seeks reversal on three grounds. First, he claims that records of his Swiss bank accounts were procured by the Government in contravention of applicable treaty provisions and were therefore inadmissible; and further, that their admission in evidence violated his rights of confrontation. Second, he claims that the District Court improperly procured the production of certain bank records of the Cayman Islands Branch of the Bank of Nova Scotia. Third, he contends that the evidence at trial was insufficient to support his conviction for bankruptcy fraud charged in Count 14. We deal with these objections seriatim.
I. The Swiss Bank Records
In October 1981, almost two years before the return of the indictment, the Government availed itself of the Treaty between the United States and Switzerland on Mutual Assistance in Criminal Matters, May 25, 1973, 27 U.S.T. 2019, T.I.A.S. No. 8302 (the "Treaty"),
Finally, pursuant to paragraph 4(a) of Article 18 of the Treaty, the bank records and certificate of authenticity were certified as genuine by the Central Authority of Switzerland. The bank records and certificates were then transmitted to the United States Government.
Davis was not notified of the authentication hearing and was not present at the hearing. Davis made no application to attend the hearing.
On appeal, Davis presents two arguments in support of his claim that the Swiss bank records were improperly admitted. First, he contends that the Government violated the Treaty by failing to notify him of the authentication hearing. Second, Davis argues that in light of the failure to notify him of the authentication hearing the admission of the Swiss bank records deprived him of his confrontation rights under the Sixth Amendment. Neither claim is valid.
A. Treaty Violation
Davis contends that the Zurich Bank records were procured in violation of Article 18, paragraph 5 of the Treaty and that the records should therefore have been excluded. That paragraph provides as follows:
At the outset, it must be noted that Davis has no standing to raise this purported Treaty violation before this Court. See United States v. Johnpoll, 739 F.2d 702, 714 (2d Cir.), cert. denied ___ U.S. ___, 105 S.Ct. 571, 83 L.Ed.2d 511 (1984). Article 37 of the Treaty provides that:
One of the enumerated paragraphs, paragraph 7 of Article 18, provides that "[i]n the event that the genuineness of any document authenticated in accordance with Article is denied by any party" that party shall have the burden of establishing that the document is not genuine. Since Davis has never contested the genuineness of the documents, paragraph 7 is not implicated.
That Davis has no standing to raise a purported violation of Article 18, Paragraph 5 of the Treaty in this context is made absolutely clear by both the interpretative letters signed by the United States and Switzerland and by the Technical Analysis of the Treaty. The interpretative letters signed on May 25, 1973 provide that it is the understanding of the United States and Swiss governments that a person alleging a violation of Article 5 of the Treaty (which deals with limitations on the use of information obtained pursuant to the Treaty) "has no standing to have such allegations
Given the clear and unambiguous language in Article 37 of the Treaty reflecting the intention of the signatory states that the Treaty would not — except in certain specifically designated circumstances — confer judicially enforceable rights on individuals
Apart from Davis' lack of standing to complain about the alleged non-compliance with the provisions of Article 18, paragraph 5, of the Treaty, it is clear that the Government did not violate the Treaty by failing to give Davis notice of the authentication hearing.
Under paragraph 5, the right to be present or represented at the authentication hearing arises only after the defendant makes an application. Davis concedes that paragraph 5 contains no explicit notice requirement, but argues that by implication the paragraph imposes upon the Government an affirmative obligation to notify the defendant whose records are the subject of a request under the Treaty. We disagree.
Davis' argument is not entirely without merit, however. Paragraph 5 — viewed in isolation — could reasonably be interpreted as imposing a notice requirement on the Government. It could be urged that unless a defendant knows that a hearing is being held, he cannot very well make an application to attend or be represented at the hearing. But, the paragraph cannot be viewed apart from other provisions of the Treaty.
Article 36 of the Treaty addresses the issue of notice. That Article, which is set forth in the margin,
In view of the complete absence of any language in the Treaty imposing a notice requirement on the requesting state and the intent of the signatory states that the Treaty would simplify and expedite the procedures for obtaining information,
In addition, Davis was afforded numerous opportunities to contest the authenticity of the bank records and consistently declined to do so. First, Davis has conceded that he was aware as early as February 19, 1982 — several months before the authentication hearing was held — that the United States had made a request for his bank records under the Treaty. Davis should have been aware that under the terms of the Treaty there would be authentication hearings which he had the right to attend on request. Yet, Davis never requested the opportunity to appear or to be represented at these hearings. Second, prior to the trial, the Government moved for an order that the bank records procured pursuant to the Treaty provisions be deemed admissible at the trial "unless the defendant Davis satisfies the Court that such records are not genuine." In reply, Davis made precisely the same claim he makes here. Judge Conner ruled that the records would be accepted as genuine "unless Davis can establish their lack of authenticity" adding that Davis "knew the Government had requested the records and should have known that under the terms of the Treaty, there would be authenticity hearings which he had a right to attend on request." Judge Conner also pointed out that Davis did "not even now suggest any reason for questioning the authenticity of the documents". Judge Conner's rulings and comments were amply justified by the record before him. Third, at no time before or during the trial did Davis seek to question the authenticity of the bank records. This remained true when he testified in his own behalf and admitted their genuineness. In view of all these circumstances, Davis cannot now successfully challenge the authenticity and admissibility of the Swiss Bank records.
B. Right to Confrontation
Davis also argues that the admission of the Swiss bank records violated his Sixth Amendment right to confront the witnesses who appeared at the authentication hearing. This claim must be rejected. It is well established that the Confrontation Clause does not preclude the admission of all extra-judicial statements when the declarant is not present at trial. Indeed, numerous exceptions to the hearsay rule have routinely been held to be consistent with the Confrontation Clause.
II. The Cayman Island Bank Records
On May 19, 1984, five weeks prior to trial, the Government issued a trial subpoena duces tecum to the Cayman Islands Branch of the Bank of Nova Scotia ("the Bank") directing it to produce bank documents relating to accounts used by Davis in furtherance of his kickback and laundering operations. Under Cayman Law, disclosure of bank records is generally prohibited, but a customer's records may be disclosed if the customer consents or if the Cayman Grand Court orders disclosure.
On June 14, 1984, after briefing and argument, the District Court directed Davis to:
The District Court also ordered Davis to sign a form directing the Bank to produce the records. The Court provided that the directive could not be used against Davis at trial either to authenticate the bank records or otherwise. Davis signed the directive, ceased his litigation in the Cayman Islands, and disclosure was made pursuant to an order of the Cayman Grand Court.
Davis presents three principal arguments on appeal. First, Davis contends that the bank records were obtained in violation of Cayman law and that the District Court therefore erred in admitting them. Second, Davis argues that the District Court improperly ordered him to cease his Cayman Islands litigation. Third, Davis argues that the District Court's order compelling him to sign the directive to the Cayman Bank violated his Fifth Amendment right against self-incrimination.
A. The Compelled Consent
Davis argues that under Cayman law, a bank which has disclosed customer records in response to a "consent directive" obtained pursuant to an order of a foreign court may be subject to criminal liability under the Cayman Confidential (Relationships) Preservation Law. Davis further contends that under the law of this Circuit a court may not compel a bank to disclose customer records located abroad when such disclosure would subject the bank or its employees to criminal liability in that jurisdiction. He therefore concludes that the Cayman bank records should not have been admitted because the Bank will be subject to criminal prosecution in Cayman.
Davis' argument is flawed. The issue on appeal is not whether the "so ordered" trial subpoena served on the Bank was properly issued, but whether the District Court order commanding Davis to issue a directive to the Bank consenting to the disclosure was proper. While Davis' solicitude for the plight of a bank confronted with potential conflicting legal commands may be commendable, that issue is more properly raised by the bank.
Despite this, Davis' objection may not be so easily dismissed. Over the last thirty years, courts have imposed certain limitations on the power of a federal court to order a bank to produce records located in a state which proscribes their disclosure. These limitations have been engendered both by a concern for the hardship imposed on the subject of the order and a respect for the national interests of the state where the records are located. The Second Circuit, as well as several others, has used an analysis derived from § 40 of the Restatement (Second) of the Foreign Relations Law of the United States (1965) in evaluating the propriety of a subpoena directing the production of information or documents located abroad where such production would violate the law of the state in which the documents are located. See Trade Development Bank v. Continental Insurance Co., 469 F.2d 35 (2d Cir.1972); United States v. First National City
This Court is aware that in recent years litigants have often attempted to circumvent these limitations by seeking an order compelling the record-owner to consent to the disclosure of the records. See, e.g., United States v. Ghidoni, 732 F.2d 814 (11th Cir.), cert. denied ___ U.S. ___, 105 S.Ct. 328, 83 L.Ed.2d 264 (1984); United States v. Chase Manhattan Bank, N.A., 584 F.Supp. 1080 (S.D.N.Y.1984); Garpeg, Ltd. v. United States, 583 F.Supp. 789 (S.D.N.Y.1984). However, because such an order may also trench upon the interests of another state, a court is required to strike
The United States has a strong national interest in the effective enforcement of its criminal laws. Cf. Bank of Nova Scotia I, supra, 691 F.2d 1384 (strong United States interest in upholding grand jury's power to investigate crimes); United States v. Field, 532 F.2d 404 (5th Cir.), cert. denied, 429 U.S. 940, 97 S.Ct. 354, 50 L.Ed.2d 309 (1976) (same); United States v. First National City Bank, 396 F.2d 897, 903 (2d Cir.1968) (strong U.S. interest in enforcing the antitrust laws); S.E.C. v. Banca Della Svizzera Italiana, 92 F.R.D. 111 (S.D.N.Y.1981) (strong United States interest in enforcing the securities laws); Vetco, supra, 691 F.2d at 1289 (strong United States interest in collecting taxes and prosecuting tax fraud). But cf. United States v. First National Bank of Chicago, 699 F.2d 341 (7th Cir.1983) (United States interest in collection of taxes outweighed by Greece's interest in bank secrecy). Furthermore, the Cayman Bank records were essential to the Government's case — a point acknowledged by Davis at oral argument. Compare Trade Development Bank, supra, 469 F.2d at 40 ("relative unimportance" of information sought); First National Bank of Chicago, supra, 699 F.2d at 346 (same).
In contrast, while the Cayman Islands has a vital national interest in preserving the privacy of its banking customers,
In balancing the United States and Cayman interests, we are cognizant that the subpoena and subsequent order arose in the course of a criminal suit brought by the United States Government. We must therefore accord some deference to the determination by the Executive Branch — the arm of the government charged with primary responsibility for formulating and effectuating foreign policy — that the adverse diplomatic consequences of the discovery request would be outweighed by the benefits of disclosure. See Vetco, supra, 691 F.2d at 1289 n. 9; Restatement (Revised) § 420 reporter's note 9 (Tent. Draft No. 3 1982).
After carefully analyzing the competing national interests, we conclude that the District Court properly ordered Davis to
B. The Order Directing Davis to Terminate His Cayman Litigation
Davis argues that the District Court improperly ordered him to cease his Cayman Islands litigation and that the bank records obtained as a result of Davis' compliance with the order should therefore be excluded. Because we find that in this case the District Court properly exercised its power, we reject Davis' claim.
At the outset, we note that the Government has cited no authority for the proposition that a United States Court may order a criminal defendant to refrain or desist from pursuing litigation before a foreign tribunal designed to block compliance with a subpoena. While this Court is aware of several cases — including the instant one
It is clear that the District Court could have ordered Davis to cease his Cayman Islands litigation on two separate grounds. First, it is well established that a United States court has the power to prescribe law governing the conduct of its nationals even when the conduct takes place outside the United States. See, e.g., Blackmer v. United States, 284 U.S. 421, 436-38, 52 S.Ct. 252, 254-55, 76 L.Ed.2d 375 (1932); Laker Airways, Inc. v. Sabena, 731 F.2d 909, 922 (D.C.Cir.1984). Davis, a United States citizen, was clearly subject to that power. Second, a United States Court also has jurisdiction to prescribe laws concerning conduct outside of the territorial boundaries of the United States which has or is intended to have a substantial effect within the United States. See In re Marc Rich & Co., A.G., 707 F.2d 663, 666 (2d Cir.), cert. denied, 463 U.S. 1215, 103 S.Ct. 3555, 77 L.Ed.2d 1400 (1983); Laker, supra, 731 F.2d at 921-22; Restatement (Revised) § 402(1)(c) (Tent. Draft No. 2, 1981). The action which was enjoined — continued litigation in the Cayman Islands directed at preventing the bank from complying in a timely fashion with the subpoena of the District Court — was designed to interfere with a pending criminal prosecution in the United States.
The jurisdiction of the District Court was, however, not exclusive; the Government of the Cayman Islands also had jurisdiction to prescribe law governing Davis' conduct in the Cayman Islands. Under Cayman law, Davis had the right to oppose the bank's efforts to secure a Cayman court order permitting the disclosure of the subpoenaed records. Because the United States and the Cayman Islands had concurrent jurisdiction to prescribe, we must determine whether, having due regard to principles of international comity, the District Court properly exercised its power.
The Restatement (Revised) § 403 (Tent. Draft No. 2 1981) suggests a number of
First, Davis' lawsuits in Cayman had a direct, substantial and forseeable effect on the United States. The Bank records which the government sought were an important part of the case against Davis, and Davis' Cayman litigation was instituted and pursued with the express purpose of preventing these documents from being introduced at trial.
Second, Davis had close links with the United States; he was both a citizen and a resident of this country.
Third, as discussed above, the United States had a strong national interest in safeguarding the integrity of its criminal process. In recent years Congress has become increasingly concerned with the use of offshore banks to launder the proceeds of criminal activities and to evade taxes. See H.Rep. No. 98-907, 98th Cong.2d Sess. (1984). This concern manifested itself in the enactment, as part of the Comprehensive Crime Control Act of 1984, of legislation designed to make foreign-kept business records more readily available and admissible into evidence in criminal trials in the United States.
Fourth, Davis had no justified expectation in the privacy of his bank records. The Fourth Amendment does not protect against the disclosure of bank records located in the United States. United States v. Miller, 425 U.S. 435, 96 S.Ct. 1619, 48 L.Ed.2d 71 (1976). Moreover, given the plethora of exceptions in the Cayman bank secrecy laws, see discussion above at 4296; Nova Scotia II, supra, 740 F.2d at 827 n. 15, the Cayman bank secrecy laws create no expectation of privacy not present in Miller. See United States v. Payner, 447 U.S. 727, 732 n. 4, 100 S.Ct. 2439, 2444 n. 4, 65 L.Ed.2d 468 (1980).
Finally, even though the Cayman Islands did not have a strong national interest in blocking the disclosure of Davis' bank records, see discussion above at 4296, like all sovereign states it did have a substantial interest in regulating the progress of litigation in its own courts. Thus, while it is well-settled that a federal court has the power to enjoin a party before it from pursuing litigation before a foreign tribunal, see, e.g., Laker, supra, 731 F.2d 909 (D.C.Cir.1984); Seattle Totems Hockey Club v. National Hockey League, 652 F.2d 852, 855 and n. 5 (9th Cir.1981), cert. denied, 457 U.S. 1105, 102 S.Ct. 2902, 73 L.Ed.2d 1313 (1982); Canadian Filters (Harwich) Ltd. v. Lear-Siegler, Inc., 412 F.2d 577 (1st Cir.1969); Harvey Aluminum, Inc. v. American Cyanamid Co., 203 F.2d 105 (2d Cir.), cert. denied, 345 U.S. 964, 73 S.Ct. 949, 97 L.Ed. 1383 (1953), on remand, 15 F.R.D. 14 (S.D.N.Y.1953) (Weinfeld, J.); Medtronic, Inc. v. Catalyst Research Corp., 518 F.Supp. 946 (D.Minn.), aff'd, 664 F.2d 660 (8th Cir.1981);
Here it is undisputed that the Government had been seeking the Cayman bank records at least since March 22, 1983 — six months prior to the return of the indictment. Demonstrating a strong desire not to intrude upon Cayman sovereignty, the Government had attempted to secure Davis' records through approaches to both the office of the Governor and the Attorney General of the Cayman Islands. Until Judge Conner issued his June 14, 1984 order, however, Davis had successfully blocked the production of the bank records.
In Laker, supra, 731 F.2d 909, the D.C. Circuit, in a scholarly opinion by Judge Wilkey, affirmed an order granting a British plaintiff's motion for a preliminary injunction
Balancing all these factors, we conclude that in this case, the District Court properly ordered Davis to terminate his Cayman litigation. We feel constrained, however, to repeat that such an order is an extraordinary remedy which may be used only in very limited circumstances — and only after other means of obtaining the records have been explored.
C. The Fifth Amendment Claim
Davis claims that the District Court's order requiring him to direct the Cayman Bank to disclose his bank records violated his Fifth Amendment right against self-incrimination. This claim is not persuasive.
It is well settled that the Fifth Amendment "does not independently proscribe the compelled production of every sort of incriminating evidence but applies only when the accused is compelled to make a testimonial communication that is incriminating." Fisher v. United States, 425 U.S. 391, 408, 96 S.Ct. 1569, 1579, 48 L.Ed.2d 39 (1976). In the instant case, the District Court ordered Davis to direct the Bank — a third party — to produce the incriminating documents. Since the only communication which Davis himself was compelled to make was the direction to the bank, that direction is the only possible source of a Fifth Amendment violation. See Fisher, supra at 409, 96 S.Ct. at 1580. In Fisher, the Supreme Court held that the Fifth Amendment was not violated when the District Court ordered a taxpayer to produce an accountant's workpapers. The Court reasoned that since the workpapers were not prepared by the taxpayer and contained no testimonial declaration by him, the taxpayer could not be said to have been compelled to make any testimonial communications. In addition, since the preparation of the workpapers was wholly voluntary, there was no "compelled" testimonial evidence. Id. at 409-10, 96 S.Ct. at 1580. See also United States v. Doe, 465 U.S. 605, ___, 104 S.Ct. 1237, 1241, 79 L.Ed.2d 552, 559 (1984). The reasoning of Fisher applies here. The bank records were prepared by the bank and contained no testimonial communications by Davis. Further, the Bank voluntarily prepared these business records and thus no compulsion was present. See Doe, supra, 104 S.Ct. at 1241-42.
III. The Bankruptcy Fraud Count
Finally, Davis argues that there was insufficient evidence to support his conviction for bankruptcy fraud. Completely misapprehending the theory under which the Government prosecuted him for bankruptcy fraud, Davis argues that there was no testimony at trial supporting the proposition that his payment of bribes to the General Dynamics officials over a period of years were made in contemplation of bankruptcy — a point which the Government does not dispute. But the scenario at trial was quite different from that which appellant describes. The bankruptcy fraud count charged Davis with having knowingly and fraudulently transferred and concealed and aided and abetted the transfer and concealment of, Frigitemp property in contemplation of a case under Title 11 U.S.C. ("the Bankruptcy Act") and with intent to defeat the provisions of Title 11.
Specifically, the bankruptcy fraud charge was based on two separate instances of transfer and concealment of Frigitemp's assets apart from the bribes paid to the General Dynamics officials. First, the evidence demonstrated what Judge Conner described as the "sweetheart" deal by which Intersystems Design and Technology Corporation ("IDT") — a new company formed and controlled by Davis — assumed all of General Dynamics' contracts with Frigitemp. By that time, their contracts constituted the only profitable contracts in Frigitemp's inventory. This assignment, made to IDT at no cost whatsoever, was accomplished on February 9, 1978, less than six weeks before Frigitemp filed for reorganization under Chapter 11, and at a time when it was clear to all concerned that the actual bankruptcy of Frigitemp was imminent. The profit remaining in the contracts was no mere speculation. Davis actually obtained over $10 million in profits from his assumption of the General Dynamics contracts, profits which should have benefited the Frigitemp estate either through continued performance under reorganization, or through outright sale to an outside contractor. Second, the evidence demonstrated that beginning in November 1974 Davis managed a series of embezzlements from Frigitemp totalling over $2 million.
In evaluating a claim that the evidence was insufficient to support a conviction, the "verdict of the jury must be sustained if there is substantial evidence, taking the view most favorable to the Government, to support it." Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680 (1942); United States v. Ginsberg, 758 F.2d 823, 824 (2d Cir.1985). If "any rational trier of fact could have found the essential elements of the crime," we must affirm the conviction. See Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979) (emphasis in original). This is a "very heavy burden", United States v. Soto, 716 F.2d 989, 991 (2d Cir.1983).
Reviewing the record under this standard, it is amply clear that the evidence was sufficient to support a determination that Davis committed bankruptcy fraud by transferring to his own company the highly profitable General Dynamics contracts. See United States v. Dioguardi, 428 F.2d 1033, 1036 (2d Cir.), cert. denied, 400 U.S. 825, 91 S.Ct. 50, 27 L.Ed.2d 54 (1970) (Friendly, J.).
However, with respect to Davis' embezzlements it is not sufficiently clear, based on the record as a whole, that they were committed in contemplation of bankruptcy.
For the foregoing reasons we affirm the judgment of conviction on all counts.