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UNITED STATES v. SKALSKY

August 26, 1985

UNITED STATES OF AMERICA,
v.
ROBERT SKALSKY, Defendant



The opinion of the court was delivered by: COHEN

 On April 10, 1985 the Grand Jury returned a three count indictment against the defendant, Robert Skalsky, charging him with willfully and knowingly attempting to evade and defeat payment of income taxes for the calendar years 1978 (Count I), 1979 (Count II) and 1961 through 1964 (Count III). See 26 U.S.C. § 7201; 18 U.S.C. § 2. Currently, there are two motions before this Court which are being made on behalf of the defendant: the first, to dismiss the indictment; the second, to compel disclosure of Grand Jury materials. *fn1" After a thorough evaluation of the facts and applicable law, and for the reasons which follow, we shall deny the defendant's motion to compel disclosure of Grand Jury materials and reserve decision on his motion to dismiss, pending an evidentiary hearing which shall be described below.

 INTRODUCTION

 In early 1980, the defendant was notified that the government sought information from him concerning the business affairs of one Emmanuel Gambino (hereinafter Gambino) who, at that time, was under investigation for income tax evasion. Prior to submitting himself for the government's questioning, the defendant, through his attorney at that time, Michael K. Simon, Esquire, who is also the defendant's son-in-law, entered into an agreement with the government's attorney, George E. Wilson, Esquire. The legal interpretation of this agreement is the initial issue for our consideration. *fn2"

 In addition to the above communications to Mr. Simon, the defendant himself became aware, subsequent to July, 1981, that he had become a target of the investigation. Thereafter, on October 6, 1981, the defendant again appeared before a Grand Jury. At this appearance, however, he asserted his Fifth Amendment privilege against self-incrimination on two occasions. This series of contacts between the defendant, his counsel and the government culminated in the filing of the instant indictment.

 DISMISSAL OF THE INDICTMENT

 Prior to addressing the issue of interpretation of the agreement between the government and this defendant, we note that generally, contractual agreements by which defendants are granted some measure of immunity are binding and enforceable. See United States v. Quatermain, 613 F.2d 38, 41 (3d Cir. 1980); United States v. Deerfield Specialty Papers, Inc., 501 F. Supp. 796, 800 n.3 (E.D. Pa. 1980). Thus, we recognize, as do the parties, that grants of immunity by judicial decree, pursuant to 18 U.S.C. §§ 6001-6003, are not the only methods of acquiring a witness' testimony.

 Having determined that the government can confer immunity by agreement, defendant now urges that the agreement at issue conferred upon him the most extensive immunity possible: namely, "transactional" immunity. An agreement of this type would place an absolute bar on prosecution "for the offense to which the compelled testimony relates." Kastigar v. United States, 406 U.S. 441, 453, 32 L. Ed. 2d 212, 92 S. Ct. 1653 (1972). However, the very first sentence of the agreement, "On the understandings specified below, the United States will not prosecute Mr. Skalsky for potential charges based upon information supplied to this office by him," contradicts defendant's interpretation. By referencing the agreement to information supplied by the defendant, the government has, at the very most, granted him use and derivative use immunity. Transactional immunity, despite defendant's arguments, which are based on his own carefully edited version of the agreement, was not provided.

 As an alternate position, the defendant urges that the agreement must be interpreted to protect him with use and derivative use immunity similar to that which is judicially sanctioned in 18 U.S.C. § 6002 and discussed in Kastigar, supra. In response, the government maintains that it merely entered into an agreement not to prosecute the defendant provided he complied with its terms. At first glance, it would appear that the parties' positions are indistinguishable. In essence, a grant of immunity from prosecution bears a striking resemblance to an agreement not to prosecute. However, considering both their up-side and down-side risks, it is apparent that these two means of inducing testimony differ significantly. Although the up-side risk to the potential defendant (i.e. non-prosecution) is virtually identical in each instance, the down-side risk (i.e. prosecution) differs substantially dependent upon whether a defendant testifies pursuant to an agreement or a grant of judicial immunity.

 If a defendant is prosecuted following a grant of use and derivative use immunity, the government must establish, by clear and convincing evidence, see United States v. Smith, 580 F. Supp. 1418, 1422 (D.N.J. 1984), that the evidence it uses to prosecute is derived from legitimate sources independent of the immunized testimony. Kastigar, 406 U.S. at 461. Any direct use of the defendant's compelled statements can come only in a prosecution for perjury or similar crimes. Cf. 18 U.S.C. § 6002; United States v. Frumento, 552 F.2d 534 (3d Cir. 1977)(prosecution subsequent to a judicial grant of immunity).

 On the other hand, a defendant who breaches an agreement not to prosecute subjects himself to prosecution for substantive offenses which were the topic of his statements. See Deerfield Papers, 501 F. Supp. at 800 n.3. In effect, the government may make use of his statements and any information it is able to derive therefrom. Id. See also United States v. Stirling, 571 F.2d 708, 732 (2d Cir.), cert. denied, 439 U.S. 824, 58 L. Ed. 2d 116, 99 S. Ct. 93 (1978).

 
Should it be judged by this office that Mr. Skalsky has given false, incomplete or misleading testimony of [sic] information, or has otherwise violated any provision of this agreement, this agreement shall null and void and he shall thereafter be subject to prosecution in this and any other prosecuting office for any federal criminal violation of which this office has knowledge, including, but not limited to, perjury and obstruction of justice. Any such ...

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