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UNITED STATES v. SMITH

February 27, 1984

UNITED STATES OF AMERICA
v.
LAWRENCE A. SMITH



The opinion of the court was delivered by: BROTMAN

 In this criminal prosecution the court has applied the principles enunciated in Kastigar v. United States, 406 U.S. 441, 32 L. Ed. 2d 212, 92 S. Ct. 1653 (1972), to determine whether the evidence intended to be used by the federal government at trial is impermissibly tainted by the defendant's prior immunized testimony before a state investigative commission. After conducting an extensive pretrial hearing to determine the nature and source of the government's evidence, the court concludes that the case to be presented by the government at trial is derived from sources totally independent of the defendant's immunized testimony. Accordingly, the court finds that the government's evidence is in no way tainted and will allow this prosecution to proceed.

 BACKGROUND

 It is undisputed that the defendant had been compelled to testify under a grant of statutory immunity *fn1" before the New Jersey State Commission of Investigation ("SCI") during 1980. He was immunized on June 5, 1980, and testified before the SCI a total of eight times between that date and December 11, 1980. His first six appearances before the SCI were in proceedings closed to the general public and his last two appearances were in open, public hearings. The SCI investigation focused on the adequacy of the laws of New Jersey regulating health care plans, whether those laws were being effectively enforced, and to what extent criminal elements had infiltrated the state's health care industry.

 In its pretrial submissions, the government tacitly conceded that the scope of inquiry of the SCI investigation overlapped to some degree with the subject matter of the present indictment. This overlap in subject matter between the previous immunized testimony and the federal indictment triggered the rights outlined in the seminal case of Murphy v. Waterfront Commission, 378 U.S. 52, 12 L. Ed. 2d 678, 84 S. Ct. 1594 (1964), wherein the Court stated:

 
Once a defendant demonstrates that he has testified under a state grant of immunity, to matters related to the federal prosecutions, the federal authorities have the burden of showing that their evidence is not tainted by establishing that they have an independent, source for the disputed evidence.

 Id. at 79 n.18. Defendant Smith has made the initial demonstration required by Murphy and has therefore shifted to the government the burden of demonstrating that its evidence against him was derived independently of the state immunity grant.

 The extent of the government's burden was outlined in Kastigar v. United States, 406 U.S. 441, 32 L. Ed. 2d 212, 92 S. Ct. 1653 (1972), where the Court held:

 
The burden of proof, which we reaffirm as appropriate, is not limited to a negation of taint; rather it imposes on the prosecution the affirmative duty to prove that the evidence it proposes to use is derived from a legitimate source wholly independent of the compelled testimony.

 Id. at 460. The Kastigar Court went on to indicate how light the defendant's initial burden is to trigger a hearing on taint (now commonly known as a " Kastigar " hearing) and reemphasized the scope of the government's burden once such a hearing becomes necessary:

 
One raising a claim . . . need only show that he testified under a grant of immunity in order to shift to the government the heavy burden of proving that all of the evidence it proposes to use was derived from legitimate independent sources.

 Id. at 461-62.

 Regrettably, while outlining the nature of the government's burden in Kastigar, Justice Powell neglected to precisely outline the appropriate procedures to be used in the district courts in conducting taint hearings. See United States v. Pantone, 634 F.2d 716, 719 (3rd Cir. 1980) ("It has been left to the lower courts to define the exact contours of the standards that the government must meet in varying contexts before evidence will be deemed untainted by association with compelled testimony") In the decade following Kastigar, the lower courts have grappled with this issue with mixed success. As the Third Circuit has observed: "Existing case law appears to offer no sure guidance to the trial courts when they are considering the question of use or derivative use of immunized testimony." United States v. Pantone, supra, 634 F.2d at 721.

 Accordingly, in designing this Kastigar hearing, this court found itself faced with three issues. First, how can the government meet its "heavy burden," 406 U.S. at 461, of showing that the defendant's immunized testimony has not been directly or indirectly used in this prosecution? Second, what format should the hearing take? Third, when should the hearing be held?

 THE GOVERNMENT'S BURDEN OF PROOF

 As to the first question, it is clear that the government must show that it has not and will not use the compelled testimony or its fruits against the defendant in any manner in connection with the federal prosecution. Murphy v. Waterfront Commission, supra, 378 U.S. at 79. The Supreme Court has recently emphasized that the testimony compelled from a witness under immunity must leave him and the government "in substantially the same position as if the witness had claimed his privilege [to remain silent] in the absence of a state grant of immunity." Pillsbury Co. v. Conboy, 459 U.S. 248, 103 S. Ct. 608, 613, 74 L. Ed. 2d 430 (1983); see also United States v. Semkiw, 712 F.2d 891, 895 (3rd Cir. 1983); United States v. Gerace, 576 F. Supp. 1185 (D.N.J. 1983).

 The government's burden is not limited to a showing that it will not use the testimony directly (for example, introducing it into evidence) or indirectly (for example, as a means to other evidence). It also has the "affirmative duty" of showing that it did not and will not exploit the immunized testimony in more subtle, elusive ways. United States v. Semkiw, supra, 712 F.2d at 895. In Semkiw, the Third Circuit warned that "such use could conceivably include . . . refusing to plea-bargain, interpreting evidence, planning cross-examination, and otherwise planning trial strategy." Id., quoting United States v. McDaniel, 482 F.2d 305, 311 (8th Cir. 1973). The court has even suggested that the use of immunized testimony as a morale booster or to provide additional confidence to federal prosecutors in preparing for trial may be an impermissible use of immunized testimony. United States v. Pantone, 634 F.2d 716, 722 (3rd Cir. 1980). Cf. Note, Standards for Exclusion in Immunity Cases, 82 Yale L.J. 171, 181 (1972) ("No one . . . can accurately estimate the subjective effect of knowledge of the witness's guilt on the investigator's zeal in pursuing new evidence").

 While the government's burden of proof is thus undeniably high, the protection mandated by Kastigar "was not intended to be an insurmountable barrier." Pantone, supra, 634 F.2d at 719. If it were, it "would effectively transform the use and derivative use statute in question, which Kastigar found to be constitutionally sufficient, into a transactional immunity statute . . . at least with regard to any given prosecutor." Id.2 It is thus indisputable that Smith can be prosecuted and convicted for his allegedly illegal conduct, even if that conduct was the subject of his SCI testimony, so long as the federal prosecutors made no direct or derivative use of his testimony before the SCI. *fn3"

 The case law provides little guidance as to the specific standard of proof to be imposed on the government in a Kastigar hearing. As noted above, Kastigar repeatedly holds that the government has a "heavy burden" in showing that its evidence derives from legitimate sources independent of the immunized testimony. 406 U.S. at 461. The court is persuaded by Judge VanArtsdalen's conclusion in United States v. Hossbach, 518 F. Supp. 759 (E.D. Pa. 1980), that requiring the government to come forward with "clear and convincing evidence," as opposed to merely a preponderance of the evidence, is the most logical standard for this type of hearing. 518 F. Supp. at 772. Accordingly, it is by this higher standard that this court has analyzed the evidence before it.

 THE FORMAT OF THE HEARING

 Having thus determined the nature of the government's burden of proof, the court turns to the question of the proper format for a Kastigar hearing. Four formats for the presentation of the government's case were considered by the court. *fn4"

 1. First there was the possibility of government prosecutors demonstrating at a hearing that a "Chinese Wall" existed between the SCI investigation and the federal investigation, i.e., that the two investigations coexisted with no information passing from state sources to federal investigators.

 This suggestion was forcefully rejected in United States v. Nemes, 555 F.2d 51, 55 (2nd Cir. 1977), cited approvingly in United States v. Semkiw, supra, 712 F.2d at 895. The court in Nemes reasoned that:

 See also Kastigar, supra, 406 U.S. at 469 (Marshall, J., Dissenting) (". . . the paths of information through the investigative bureaucracy may well be long and winding, and even a prosecutor acting in the best of faith cannot be certain that somewhere in the depths of this investigative apparatus, often including hundreds of employees, there was not some prohibited use of the compelled testimony.") The court shares these concerns, and finds that a Chinese-Wall format, standing alone, *fn5" is insufficient to guarantee the absence of taint.

 2. Second, there was the possibility of the federal investigators and prosecutors stipulating that they conducted their investigation independently of the SCI probe, made no use of the immunized testimony in pretrial preparations, and will not use the testimony in any way at trial.

 The court rejects the notion that any such stipulation and denial of use by federal prosecutors, standing alone, is sufficient to negate the possibility of taint. Such a stipulation was considered and rejected in United States v. Nemes, supra, 555 F.2d at 54-55, as inconsistent with the government's heavy burden of proof. See also United States v. Semkiw, supra, 712 F.2d at 895. Such an approach would also flaunt the Supreme Court's warning in Kastigar that a witness should "not [be] dependent for the preservation of his rights on the integrity and good faith of the prosecuting attorneys." Kastigar, supra, 406 U.S. at 460, quoted in Semkiw, supra, 712 F.2d at 894. Moreover, the problems inherent in a "Chinese Wall" approach discussed above apply equally to a "stipulation" approach.

 3. A third possible procedure would be for the government to demonstrate conclusively at the Kastigar hearing that it had prior knowledge of the information contained in Smith's immunized testimony.

 This procedure would similarly be inadequate. In Semkiw "one of the undisputed facts was that the prosecution already possessed all of its evidence against the defendant even before it compelled him to testify." 712 F.2d at 895. Nonetheless the court ruled that the record in that case "[did] not show that defendant and the prosecution remained in substantially the same position as if defendant had not testified." Id. The court reasoned that prior knowledge by federal prosecutors of the case against the defendant would not preclude the government's use of defendant's subsequent, immunized testimony in other, more subtle ways, such as for interpreting evidence or planning cross-examination. Accordingly, the court remanded the case to the district court for findings as to the issue of the use or derivative use of the immunized testimony. Id. In the instant case, this court must therefore conclude that a demonstration of prior knowledge of the case against Smith would not constitute a sufficient negation of the possibility of taint and would not prove that the case against the defendant was derived from sources wholly independent of the immunized testimony. *fn6"

 4. The fourth possibility, ultimately chosen by the court, was for a full evidentiary hearing at which the government would be required to demonstrate conclusively (1) that the evidence to be presented at trial was derived from sources totally independent of the defendant's immunized testimony; and (2) that the government did not use the immunized testimony in any respect. This format strikes the court as the only means whereby the government can satisfy the heavy burden imposed on it by Kastigar and its progeny.

 The procedure of a full evidentiary hearing before a trial judge was recommended in United States v. Hossbach, 518 F. Supp. 759 (E.D. Pa. 1980):

 
Probably the only way the government could ever meet its "heavy burden" . . . would be to present at a pretrial hearing all of the testimony and evidence it proposes to present at trial. The trial judge would then be required to make specific findings of fact and conclusions of law as to taint and, in effect, by a full nonjury "pretrial trial" purge the record to be developed at trial.

 Id. at 771-72. Similarly the Third Circuit in Semkiw followed the Second Circuit's Nemes opinion by remanding the proceeding to the district court "so that it may conduct an evidentiary hearing and make findings of fact and conclusions of law." 712 F.2d at 895.

 This court is in accord with the procedures supported in Hossbach and Nemes, and would add the following qualification. Demonstrating that the evidence to be used at trial was "untainted" would not alone necessarily establish that the government did not use the immunized testimony in some of the more subtle and remote ways discussed above. For instance, it would not indicate whether the government used the evidence in its approach to plea-bargaining, in interpreting evidence or in planning cross-examination for trial. Semkiw requires that the record of a Kastigar hearing demonstrate what use the prosecution may have made of immunized testimony "in the preparation and conduct of trial." 712 F.2d at 895 (emphasis supplied). Accordingly, in addition to showing that the federal government's evidence is derived from sources totally independent of the defendant's immunized testimony, the government must demonstrate the steps it took to establish a "Chinese Wall" between its investigation and that of the SCI as of the date Smith was granted statutory immunity.

 THE TIMING OF THE HEARING

 The government argued that if a Kastigar hearing was necessary, it should be held post-trial rather than pre-trial. In support of this argument, the government made the following points: (1) its case had not yet solidified into a form conducive to a pre-trial preview; (2) a pre-trial hearing would unduly fix the government's trial strategy and give the defendant an unwarranted peek at the government's case; (3) if the government deviates from its mini-trial evidence and presents testimony not yet approved as untainted by the court, defendant will call for a hearing and thereby disrupt the trial; and (4) if a pre-trial hearing is not held and defendant is acquitted, the need for a mini-trial will be eliminated.

 Ranged against these considerations were the following points: (1) the government's reluctance to expose its case pretrial has no bearing on the proper method necessary to safeguard defendant's Fifth Amendment rights; (2) the court expects the government to have the bulk of its trial evidence ready immediately, for a pre-trial airing; (3) in the court's view, evidence not subjected to pre-trial review, may upon motion of counsel, be scrutinized out of the jury's hearing without unduly delaying the trial; (4) if the court finds at a pre-trial hearing that the prosecution unduly exploited defendant's immunized testimony, the indictment may be dismissed and the possibility of trial ended; and (5) if a post-trial hearing should find extensive improper use of tainted evidence, the court may be forced to declare the proceedings a mistrial and hold a second, lengthy trial.

 Precedent indicates that in almost every instance involving a Kastigar issue, a pre-trial hearing was held. The court notes that in Semkiw the Third Circuit ordered a post-trial hearing, but the court does not find this order discordant with the idea that a pre-trial hearing is the proper arrangement. The court reads Semkiw to say that the proper response to a motion for a pre-trial Kastigar hearing is to hold that hearing before trial; post-trial Kastigar hearings are appropriate only when the court has either not been faced with a motion for a Kastigar hearing pre-trial or when the court has erred in its discretionary determination of whether to hold a Kastigar hearing at all. Certainly, nothing in Semkiw provides authority for a court faced with the situation now at hand -- a clearcut choice between a pretrial and a post-trial hearing -- to hold that a post-trial hearing is superior.

 When these considerations were weighed in conjunction with the language of Kastigar itself, which twice refers to the need for the government to purge of taint "the evidence it proposes to use," 406 U.S. at 460, 461 (emphasis added), the court found that a pre -trial hearing is the recommended course.

 The court recognized that such a hearing would prove onerous and time-consuming. Nonetheless, a hearing on this scale is in the government's interest as well as defendant's and is the only means by which the court can satisfy the requirements of Kastigar and Murphy.

 THE HEARING IN THIS CASE

 Following the procedure discussed above, this court conducted a twenty-six day evidentiary hearing that produced over 3,500 pages of transcript testimony. As noted above, the court imposed two burdens on the government. First it was required to present testimony that showed that the evidence presented at trial was derived from sources totally independent of the defendant's immunized testimony. Second, in compliance with the strict standards set forth in Semkiw, it was required to show that the government's investigation was insulated from the SCI investigation from the moment that Smith was granted statutory immunity to the present time. Only through this dual showing could the government meet its burden of showing that it has in no way benefitted from Smith's immunized testimony.

 At the hearing, federal officials from all phases of the government's investigation of the defendant testified and were fully cross-examined by defendant's counsel. Among these witnesses was the prospective trial attorney for the government, *fn7" ...


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