No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.
The Fifth Amendment is popularly known for its protection of the right of the accused to remain silent. The Fifth Amendment involves due process rights prohibiting the government from acting improperly or unfairly, requiring government action to be performed in a strict manner prescribed by law. It protects the accused from being convicted of a crime without the presentment and indictment of a Grand Jury. It also protects against double-jeopardy. The Fifth Amendment also protects the arbitrary seizure of private property for public use without just compensation. As with all other amendments, there are loopholes in the Fifth.
The following article discusses a case in which the accused invoked the fifth, never giving a testimony at all. A New York investment firm was accused of a Ponzi scheme. It is suggested that the U.S. Securities and Exchange Commission may be "overstepping its bounds trying to make up for lack of evidence." This article illustrates the complications that may occur with invoking the fifth.
SEC, attorneys spar over Fifth Amendment claim in McGinn Smith case
The Business Review - by Barbara Pinckney
Date: Tuesday, June 22, 2010, 11:10am EDT - Last Modified: Tuesday, June 22, 2010, 2:56pm EDT. Related: Banking & Financial Services, Bankruptcies
...Several witnesses spoke during a court hearing earlier this month to determine if assets of McGinn Smith & Co. and its principals should remain frozen. But the most important testimony may have come from the two men who never said a word.
The U.S. Securities and Exchange Commission wants the U.S. District Court to draw an “adverse inference” from that fact that firm principals Timothy McGinn and David Smith invoked their fifth amendment rights against self incrimination rather than take the stand. It also wants that inference extended to Lynn Smith, David’s wife and a relief defendant in the SEC’s securities fraud case against McGinn Smith.
But in memorandums filed late last week, attorneys for Lynn Smith and David Wojeski—the East Greenbush CPA named last month as trustee of an irrevocable trust the Smiths set up for their children nearly six years ago—say the SEC is overstepping its bounds and trying to make up for a lack of evidence,
The SEC filed its civil suit against McGinn Smith, an Albany, New York investment firm, and its principals in April. The government agency put the damages from an alleged Ponzi scheme at $84 million. That money, much of which was raised from nonaccredited investors, allegedly went into illiquid businesses owned by Smith and McGinn, McGinn Smith payroll, and personal loans to the principals and others.
The court issued a preliminary injunction April 20, freezing the assets of the firm and its principals. On June 9, a hearing convened before the Hon. David Homer, to determine if that injunction should remain in place pending the outcome of the civil suit.
McGinn and Smith had already consented to the preliminary injunction, but were still called by the SEC as witnesses.
In documents filed with the court in early June, the men said they could not testify, or provide the SEC with documents or a verified accounting of their assets, because of a pending criminal investigation into their activities. Judge Homer ruled that they could “take the fifth” through sworn declarations.
The hearing, which lasted three days, focused on assets controlled by Lynn Smith, namely a $2.5 million brokerage account; the $3.5 million David L. and Lynn A. Smith Irrevocable trust; a checking account; and a $1.7 million home in Vero Beach, Fla. The SEC contended that these should remain frozen because Lynn Smith allegedly received $1.8 million from McGinn Smith “during the period of fraud.” It also has argued that the assets are actually marital property, and that the Florida home and checking account were put in Lynn Smith’s name a year ago to shield them from creditors.
In a memorandum of law filed with the court June 16, the SEC noted that David Smith’s declaration made it clear that he would not answer any questions about any of these assets or transfers.
“Accordingly, it is appropriate to draw an adverse inference against David Smith with regard to all issues concerning the trust, the stock account, the checking account and the Vero Beach house,” it wrote.
And, because “David and Lynn Smith’s interests are intertwined and clearly aligned,” the negative inference should be extended to Lynn Smith, it said.
James Featherstonhaugh, who represents Lynn Smith for the Albany firm Featherstonhaugh Wiley & Clyne, LLP, said in a memorandum filed June 18 that Lynn Smith should not even be a relief defendant. He said the SEC failed to prove two key things: that the funds she received were “ill-gotten gains” and that she had no legitimate claim to them.
He said the SEC is “apparently attempting to use the adverse inference as a method of avoiding its own evidentiary burden as to the specific elements it must show to demonstrate that Lynn Smith is a properly named relief dependent.”
Jill Dunn, the attorney representing Wojeski, agreed that the SEC’s attempt to extend the adverse inference to Lynn Smith—and therefore to the irrevocable trust—“demonstrates the obvious weaknesses in [the commission’s] legal argument on this issue.”
The SEC had also asserted, toward the end of the court hearing, that the trust was established, in 2004, to shield assets from creditors. A year earlier, McGinn Smith began raising money from investors through four debt funds the SEC now says were fraudulent.
Dunn argued that ‘not a single piece of evidence was admitted to support his absurd contention” and that it was “belatedly offered [by the SEC] to salvage its failure of proof.”
Read more: SEC, attorneys spar over Fifth Amendment claim in McGinn Smith case
The Business Review
The following video features local Olathe, Kansas lawyer Paul D. Cramm's speech about the Fifth Amendment. He states that law enforcement often suggest those arrested to "provide their side of the story." He encourages viewers to exercise their Constitutional right to remain silent. He says that "people need to understand no good can come from waiving their Constitutional right."