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Securities & Exchange Commission v. Milne

United States District Court, D. Connecticut

October 23, 2018

SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
v.
JOHN N. MILNE, Defendant.

          RULING ON MOTION TO QUASH

          Robert M. Spector United States Magistrate Judge

         The defendant, John N. Milne, and the respondent, Attorney Andrew Bowman, [1] have filed a motion to quash the subpoena duces tecum that the plaintiff, the Securities and Exchange Commission (“Commission”), served upon the respondent on July 11, 2018. (See Doc. No. 45 at 1; Doc. No. 45 at 6, Ex. A.) The defendant and the respondent argue that the Court should grant their motion because production of the documents that the Commission seeks would violate the Fifth Amendment protection against self-incrimination, the Sixth Amendment right to the effective assistance of counsel, the attorney-client privilege, and the work product doctrine. (Doc. No. 45 at 1). The Commission responds that, because the documents it seeks relate to the defendant's payment of fees to the respondent, the documents are not privileged or otherwise protected and, therefore, the motion should be denied. (Doc. No. 47 at 2.) For the reasons detailed below, the Motion to Quash (Doc. No. 45) is DENIED; the respondent shall comply with the subpoena one week after the defendant's criminal appeal has been resolved.

         I. BACKGROUND

         On October 13, 2009, the defendant pleaded guilty to one count of conspiracy to falsify the books and records of United Rentals, Inc. while he served as its Chief Financial Officer, in violation of 18 U.S.C. § 371. See Milne, Doc. No. 75. As part of the plea agreement, the defendant agreed to pay $6, 250, 000 in disgorgement to the Commission. Id. The Court sentenced the defendant to 27 months' imprisonment, followed by 36 months' supervised release. See Id. at Doc. No. 89. The Court imposed numerous special conditions on the defendant's supervised release, including, inter alia, that “[t]he defendant shall comply with the conditions of the plea agreement dated October 9, 2009, as it relates to the Disgorgement in Lieu of Restitution and Fine. This requires the defendant to make payments to the [Commission] in the total amount of $6, 250, 000.00.” Id. The final judgment included a payment schedule regarding the disgorgement, which provided, inter alia:

A. Defendant shall pay the first $1 million of the disgorgement in three installment payments according to the following schedule: (1) $333, 333 within 90 days of entry of this Final Judgment; (2) an additional $333, 333 within 180 days of entry of this Final Judgment; and (3) an additional $333, 334 within 270 days of this Final Judgment (the “payment schedule”).
B. After Defendant complies with the payment schedule set forth above, he shall satisfy the remaining disgorgement balance due of $5.25 million plus applicable post-judgment interest within three (3) years after the entry of this Final Judgment.

(Doc. No. 40.)

         On April 5, 2018, the defendant admitted to violating the special condition of his supervised release that required him to pay to the Commission $6, 250, 000.[2] See Milne, at Doc. No. 217. Accordingly, the Court sentenced the defendant to an additional 24 months' imprisonment, with no supervised release to follow. Id. On April 19, 2018, the defendant filed a notice of appeal regarding the Court's order revoking supervised release and the defendant's 24-month sentence, and on May 22, 2018, the defendant retained the respondent as his appellate counsel. See Id. at Doc. No. 222; see also supra note 1.

         On June 25, 2018, the Commission served the respondent with a subpoena, which required the respondent to:

A. Produce all Documents Relating To any payment made by or on behalf of the [defendant and/or any entities owned or controlled by the defendant], including but not limited to payment documentation such as checks (front and back), receipts, and wire transfer authorizations and confirmations.
B. Produce all Documents Relating To any and all records of fees, monies, property or other things of value (including the payment of expenses related to leisure activities such as vacations, flights, hotel accommodations, and meals) received, accepted, transferred or held by [the respondent] to any payments made by or on behalf of the [defendant and/or any entities owned or controlled by the defendant].
C. Produce all Documents Relating To any bank, financial institution, or financial account of or for the benefit of the [defendant and/or any entities owned or controlled by the defendant], including, but not limited to, application material, account statements, and ABA routing numbers.

(Doc. No. 45 at 12, Ex. A.)

         On August 2, 2018, the defendant and the respondent filed this Motion to Quash (Doc. No. 45) with an accompanying memorandum (Doc. No. 46). On August 21, 2018, the Commission filed its response. (Doc. No. 47.) On August 22, 2018, the Court referred the Motion to Quash to this Magistrate Judge. (Doc. No. 48.) Following a status conference on September 6, 2018, the Court ordered that the parties may file supplemental memoranda addressing whether it should defer decision on the motion until the defendant's criminal appeal has been decided. (Doc. No. 51, citing United States v. Saccoccia, 898 F.Supp. 53, 56 (D.R.I. 1995) (deferring decision on government's application until after appeal was ...


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