My legal practice includes representing businesses that are the focus of federal and/or state investigations, so I am very familiar with the concerns that business owners and officers feel when the government requests documents and information. While every case is different, and the best defenses available to a specific business vary with the specific facts of the case, I often am asked whether the Fifth Amendment protects a business (and its owners and officers) from having to produce corporate documents and information.
By way of background, the Fifth Amendment to the United States Constitution clearly establishes that no person “shall be compelled in any criminal case to be a witness against himself”. Similarly, Article 12 of the Massachusetts Declaration of Rights (which is the Massachusetts state version of the federal Constitution) guarantees that no person may “be compelled to accuse, or furnish evidence against himself”. These constitutional protections, which are commonly characterized as a person’s “right to remain silent”, are vital to defending individual freedom against governmental overreach.
The problem, for modern-day business owners and corporate officers, is that the courts treat this right to remain silent as applying to “natural” people, and not to incorporated businesses. In other words, because incorporated business entities are formed in order to protect the business owners and officers from personal liability for the business’ debts, the corporation is considered a separate “legal person” in the eyes of the law. As a general rule, this is beneficial for the business owner and officers, because the corporation is allowed to enter into contractual and other business operations without exposing the individual owners and officers from any personal financial liability for the corporation’s debts and liabilities.
Although corporations are considered separate “legal persons” for the purpose of shielding their owners and officers from personal financial liability for corporate debts, corporations are not considered “ natural persons”. This distinction can be critical, because it means that a corporation cannot refuse to turn over documents or other information by relying on the Fifth Amendment or Article 12, even if the requested documents or other information will have the effect of criminally incriminating the corporation and its owner(s), officer(s), and/or employee(s). As the Supreme Court explained in a 1988 case captioned Braswell v. United States, the Fifth Amendment privilege against self-incrimination applies only to natural persons and protects only private papers – consequently, since corporations are not “natural persons” and corporate records are not private, a corporation must produce its properly-demanded records, even if the records will criminally incriminate the corporation and its owner(s), officer(s), and/or employee(s). Moreover, even if the government’s demand for corporate records is directed to an individual representative of the corporation and that individual representative may be personally incriminated by the corporate records, the Fifth Amendment still does not shield the individual representative from producing the corporate records. Further, this absence of Fifth Amendment protection extends to corporations of all sizes, even closely-held corporations with a single shareholder; in other words, if the corporation consists of only a single owner, officer, and employee, that single individual may be compelled to produce corporate documents that will directly, and criminally, incriminate the individual owner.
In Massachusetts, the state supreme court similarly has ruled that Article 12 of the Massachusetts Declaration of Rights does not shield a corporation from producing properly-demanded corporate records, even if the corporate records will criminally incriminate the corporation or its owner(s), officer(s), or employee(s). With regard to individual corporate representatives who are served with a demand to produce corporate records that could incriminate the individual representative, the state courts have ruled that Article 12 protects the individual from being forced to produce the corporate documents, but this protection is largely illusory – more specifically, the state courts also have ruled that, under such circumstances, the corporation must appoint another representative who will not be incriminated by producing the requested corporate records. In any event, the content of the corporate records may be used to prosecute the corporation and any of its implicated owner(s), officer(s), and/or employee(s), even the individual representative who successfully avoided producing the records pursuant to Article 12.
In sum, once a business enterprise is incorporated, neither the Fifth Amendment nor Article 12 may be relied upon to protect the corporation and its owner(s), officer(s), and/or employee(s) from being forced to produce incriminating corporate records.
Ironically, if an individual elects to run a business as a sole proprietor (as opposed to forming a corporation that will protect the owner from personal financial liability for corporate debts, as described above), the owner may have a greater degree of protection against being forced to produce potentially incriminating business records. More specifically, a sole proprietor may be able to resist a subpoena for business records, if he can establish that, by virtue of producing the records, he will incriminate himself.