The Fifth Amendment to the United States Constitution includes, within its scope of personal rights, an affirmation 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 guarantees that no person may “be compelled to accuse, or furnish evidence against himself”. These constitutional protections, which are commonly illustrated by a suspect’s “right to remain silent”, are vital to striking the appropriate balance between governmental power and individual liberty.
As a general rule, businesspeople pursue their commercial endeavors through an incorporated entity, because doing so protects them from personal liability for claims asserted against the corporation. This protection generally applies even to small, or closely-held, corporations involving a single owner. Consequently, and while some exceptions apply, an individual who forms a corporation in which he is the sole owner, officer, and employee is shielded from personal financial liability for debts or other liabilities incurred by the corporation. Within this context, the corporation typically is regarded as a separate legal “person” that possesses certain legal rights, such as the right to enter into contracts and to own property, while shielding the corporation’s owner(s) and employee(s) from personal financial liability for the corporation’s debts and liabilities.
Nevertheless, this general principle of separate corporate “personhood” is subject to a very important exception – the 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.
In Massachusetts, the Supreme Judicial 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 Supreme Judicial Court has ruled that Article 12 protects the individual from being forced to produce the corporate documents, but this protection is largely illusory – more specifically, the Supreme Judicial Court has 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 his business as a sole proprietor (as opposed to forming a corporation that will protect him from personal financial liability for corporate debts, as described above), he 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 by admitting the records exist, that the records are in his possession and/or control, and that the records are authentic.