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SCHULTZ v. YEAGER

November 21, 1967

Mortimer L. SCHULTZ, Petitioner,
v.
Howard YEAGER, Warden, New Jersey State Prison, Respondent



The opinion of the court was delivered by: AUGELLI

 AUGELLI, Chief Judge:

 This is a petition for federal habeas corpus relief. Petitioner was tried in the Essex County Court on a number of indictments handed down by the Essex County Grand Jury on December 19, 1963 and January 2, 1964. The indictments contained a total of 74 counts, charging petitioner with different types of commercial fraud, including obtaining money by false pretenses, conversion of money by a corporate officer, keeping of fraudulent accounts by a partner, circulation of false written statements by a partner, omission of material particulars in books of account by a partner, and making of false entries by an officer in corporate books of account.

 The trial commenced on May 13, 1964, and terminated on June 16, 1964, with jury verdicts of guilty on 67 counts, and not guilty on 3 counts. The remaining 4 counts were dismissed at the trial. On August 5, 1964, petitioner, who had appeared PRO SE throughout the trial, was sentenced to serve terms of imprisonment aggregating not less than 10 nor more than 20 years, and he is presently confined in the New Jersey State Prison.

 Following the imposition of sentences petitioner, through his present counsel, filed an appeal in the Appellate Division of the Superior Court of New Jersey. Before argument in that court, the Supreme Court of New Jersey certified the appeal, and on January 24, 1966, in a PER CURIAM opinion, affirmed the judgments of conviction. State v. Schultz, 46 N.J. 254, 216 A.2d 372 (1966). On April 25, 1966, the Supreme Court of the United States denied certiorari. Schultz v. New Jersey, 384 U.S. 918, 86 S. Ct. 1367, 16 L. Ed. 2d 439 (1966). Since the petition here raises the same issues that were determined by the highest state court, petitioner has exhausted his state remedies. Brown v. Allen, 344 U.S. 443, 73 S. Ct. 397, 97 L. Ed. 469 (1953); Fay v. Noia, 372 U.S. 391, 83 S. Ct. 822, 9 L. Ed. 2d 837 (1963).

 In this Court, petitioner alleges that his conviction and sentences, pursuant to which he is being detained, are "* * * in violation of the Fourth and Fifth Amendments to the United States Constitution, as made applicable to the states by the Fourteenth Amendment, in that petitioner's conviction was based upon evidence obtained by an unreasonable search and seizure; the petitioner was forced to incriminate himself due to the failure of the state to accord him immunity from prosecution under applicable state law; and petitioner was subjected to numerous comments, during the course of his trial, during the State's summation and during the charge of the court, concerning his failure to testify in his own behalf."

 This Court has heard argument on these issues in connection with petitioner's request for an evidentiary hearing on said issues. The request was taken under advisement. After a careful and detailed examination of the entire state court record, the Court has concluded that petitioner's federal constitutional rights have been violated in the particulars hereinafter set forth. Consequently, no evidentiary hearing is necessary.

 The facts relating to the "search and seizure" and "immunity" issues are as follows:

 On June 26, 1963, the New Jersey Bureau of Securities issued and served upon petitioner a subpoena, directing him to appear forthwith before the Bureau to testify regarding practices of himself and others in the sale of securities in New Jersey. On the following day, two additional subpoenas, DUCES TECUM in form, were issued and served by the Bureau upon Sherman Hirschfeld, an accountant who had been employed by petitioner and his companies as comptroller and office manager. One of said subpoenas, addressed to Hirschfeld personally, directed him to appear forthwith before the Bureau to testify regarding his activity, and that of others, in the sale of securities in New Jersey, and to bring with him "[all] personal records of Mortimer L. Schultz [petitioner] and First Jersey Servicing Co. including the records of any participating certificates sold by Mortimer L. Schultz, bookkeeping records and financial statements of Mortimer L. Schultz's activities, San-Mac Associates, [and] Wiss Building Associates." The other subpoena served on Hirschfeld was directed to First Jersey Servicing Co., and required a forthwith appearance before the Bureau with "[all] books, records, papers and documents."

 First Jersey Servicing Co. was wholly owned by petitioner. San-Mac Associates and Wiss Building Associates were limited partnerships in which petitioner was the sole general partner. Hirschfeld's relationship to petitioner and his companies has already been noted. Hirschfeld was served with the "forth-with" subpoenas previously mentioned, at his office, which was also petitioner's private office as well as the office of his various business enterprises.

 As a result of the subpoenas served upon Hirschfeld on June 27, 1963, the Bureau of Securities obtained numerous records and documents, which petitioner later claimed were the business and personal records of himself and his family. On July 3, 1963, when petitioner appeared with counsel before the Bureau in response to the subpoena directed personally to him, he was only questioned concerning certain "Lin-Bay" properties, which questions he answered after his counsel stated on the record:

 
"At this time, if I may interrupt, I think my client would like to exercise his privilege against stating anything which might incriminate him for the record."

 After the questioning on the Lin-Bay properties had been concluded, and following some colloquy regarding petitioner's failure to produce records, he was excused and never asked to return. Petitioner states that when he appeared before the Bureau on July 3, 1963, the Bureau was in possession of the records it had obtained from Hirschfeld, but that petitioner did not know this, nor was he informed of that fact. Petitioner contends he should have been told by the Bureau that it was then in possession of said records; also, that the manner in which the records were obtained, VIA the Hirschfeld subpoenas, was a subterfuge to defeat petitioner's right to immunity. It is to be noted that Lin-Bay, a limited partnership in which petitioner at one time had an interest, was not at all involved in the criminal trial.

 With this factual background, consideration will first be given to petitioner's claim that he was entitled to immunity from prosecution under N.J.S.A. 49:3-16(d), and then to his claim that some of the records used at his trial were obtained by an illegal search and seizure. The trial court afforded petitioner a hearing on both issues, but denied relief.

 In affirming the convictions in this case, the Supreme Court of New Jersey held that there was no factual basis for a claim of immunity under the New Jersey statute. The court pointed out that petitioner was not subpoenaed to produce any records, and that he produced none; that any personal records of petitioner that were produced by the custodian (Hirschfeld) in response to the Bureau subpoenas "* * * may well have been part of the total records of the business operations because of the mode in which those operations were conducted." The court further pointed out that petitioner made no effort to show how any of the records bore upon his conviction; and that, in any event, no claim of privilege was made to the Bureau when the records were handed over.

 There is no merit to petitioner's claim of immunity. N.J.S.A. 49:3-16 authorizes the New Jersey Bureau of Securities to investigate violations of the securities law and to compel, through subpoena, the attendance of witnesses and the production of records. Subsection (d) of the statute provides that:

 
"No person is excused from attending and testifying or from producing any document or record before the bureau, or in obedience to the subpoena of the bureau chief or any officer designated by him, or in any proceeding instituted by the bureau, on the ground that the testimony or evidence (documentary or otherwise) required of him may tend to incriminate him or subject him to a penalty or forfeiture; but no individual may be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter or thing concerning which he is compelled, after claiming his privilege against self-incrimination, to testify or produce evidence (documentary or otherwise), except that the individual testifying is not exempt from prosecution and punishment for perjury, false swearing or contempt committed in testifying."

 The statute clearly grants immunity from criminal prosecution to an individual who, after claiming his privilege against self-incrimination, is compelled to testify or produce documentary evidence. But there must be a factual situation that comes within the statutory language before a grant of immunity is warranted. The testimony given by petitioner on July 3, 1963, regarding the Lin-Bay properties, is not here in issue. The claim of privilege that was asserted on that day by petitioner's counsel, even assuming its validity, cannot be construed to extend to matters concerning which petitioner neither testified nor produced records. In response to the subpoena served upon him personally, petitioner appeared and testified only with respect to Lin-Bay. He was not subpoenaed or compelled to produce any records, and he produced none.

 Petitioner's reliance on the cases of People ex rel. Kenny v. Adams, 292 N.Y. 65, 54 N.E.2d 10 (1944), and United States v. Hopps, 215 F. Supp. 734 (D.Md.1962), aff'd 331 F.2d 332 (4 Cir. 1964), is misplaced.

 In Kenny, the defendant was compelled, under threat of arrest, to turn over to state authorities, pursuant to a "forth-with" subpoena, certain books and records kept in his private business, prior to his required appearance before said state authorities. In holding that the defendant was entitled to immunity, the court found as a sufficient basis therefor the fact that the state authorities had compelled the defendant, over his objection, to submit his records to them pursuant to the subpoena directed to him. No such factual situation is present in the case at bar.

 In Hopps, the defendant was convicted of using the mails to defraud in connection with the sale of securities. One of the contentions made by the defendant was that he was entitled to immunity under Article 23-A, § 359, of the New York General Business Law, McKinney's Consol.Laws, c. 20. This statute provides that a person shall not be prosecuted if he is directed, over his request to be excused, to produce documents by state authorities in a securities investigation. The subpoena in Hopps was addressed to the custodian of certain corporate and other records which the defendant claimed belonged to him. It was held that since the defendant did not produce these records pursuant to a subpoena directed to him in the state proceedings, he was not entitled to immunity under the New York statute. It was also held that ...


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