Senator GRASSLEY. Let me interrupt just a minute. Senator GRASSLEY. I have to explain to you and also to the witness and to the audience that I am going to be in and out during this; and I am going to leave right now to make a quorum at the Judiciary Committee, and then I also have my regulatory reform bill up before Judiciary. So, I will absent myself and be in and out. Would you introduce Judge Winner then? Senator ARMSTRONG. I will, indeed, Mr. Chairman. And I think all concerned will understand the problem. If there is anyone in the room who is not aware of it, the Senate is in session, and it may well be that this hearing will be punctuated by rollcall votes. We were in session until after 1 this morning and about the same the day before. So, this may be a little disjointed, but Senator Grassley and I and members of our staffs who have been working on this are determined that, even if we have to interrupt and one thing and another, we are going to get all of this on the record and try to draw some proper conclusions and to determine what legislative response, if any, will be needed. So, we will be right here, Senator, and doing business until you return. To pick up where I left off, the point that I want to bring into perspective the Omni case-is that Omni's attorney filed a motion to dismiss the case, charging among other things that the assistant U.S. attorney and two IRS agents had altered documents in the case and had not told the defendants or the court about the changes. Looking into the case, I was told at the time that 5 years earlier the Federal district court had dismissed another criminal case because the same assistant U.S. attorney had apparently withheld key document from the defense. On May 28, 1985, another Washington Post article appeared which reported the following, and I quote: At an evidentiary hearing last summer before U.S. District Court Judge Walter E. Black, Jr. a documents expert and other witnesses contradicted claims of IRS agents that several of the memos were written in 1983, prior to Omni's motion to dismiss. In fact, according to the testimony, the memos were prepared in the spring of 1984, most of them after Omni's motion to dismiss was filed on April 27, 1984. After a year's deliberation, the Federal District Court for Maryland granted the defendant's motion and dismissed the indictment. Although we are going to be going into this case in greater detail later, I want to just give a brief summary of how it evolved and the district court's reaction because it ties in very closely with the developments in the Kilpatrick case. On March 13, 1984, a grand jury returned a seven-count indictment against Omni International and four individuals. The defendants were charged with conspiracy to defraud the IRS, conspiracy to commit income tax evasion, and tax evasion for the years 1976 through 1980. The prosecution contended that the defendants were evading taxes by falsely reporting income in the name of untaxed, wholly owned Bermuda subsidiaries; and in fact, the income allegedly should have been reported as belonging to the parent company, Omni. The defendants countered that the IRS Code provides that, under certain circumstances, income earned by a controlled foreign corporation is not immediately taxed as U.Š. income but is taxed only when it is brought into the country. Now, I don't want to spend a lot of time on the merits of the case because that is not the issue before this committee. The issue that is before the committee arises from the following facts. On April 27, 1984 the Omni defendants filed a motion to dismiss the indictment, disqualify Government counsel and investigators, and suppress evidence based upon violations of the attorney-client privilege. A 28-day hearing was held on this motion in the summer of 1984. Until recently the court had the motion under advisement; but on May 15 of this year-a little over a month ago-in a 64-page opinion, the court meticulously reported violation after violation that occurred by the prosecution in the Government's defense against the defendant's allegation; based upon these abuses, the court dismissed the indictments. And the court expressed grave concerns over four aspects of the case. First, the creation and alteration of at least 10 documents by the assistant U.S. attorney and two IRS agents which were given to the defendants and the court and preparation for the June hearing on the motion to dismiss the indictments. Of secondary concern is what the court described as "repeated untrue and incorrect testimony which occurred during the course of the proceedings," which the court said, by its sheer magnitude, prejudiced the defendants and the court. Third, the court emphasized an aspect of the Government's investigation that it found particularly startling, which the following passage in the opinion explains, and I now quote: Perhaps the most flagrant troubling aspect of the entire tax investigation occurred when the Government interviewed Sandra Poe Wilkins, Bornstein's secretary. Bornstein is an attorney for Omni and also a codefendant. The Government contends that there is no impediment-legal, technical, ethical, or otherwise-to an unannounced, uncounseled, surprise interview of a lawyer's secretary when the focus of the interview will be on what the secretary knows about the relationship between the lawyer and his client. Unlike lawyers who can protect the attorney-client privilege, secretaries have no legal training and cannot be expected to make sophisticated judgments regarding the scope of the privilege. One more sentence sums up the reaction of the court: This court is shocked and offended by such a procedure and condemns this investigatory tactic, especially in the factual situation presented here. A fourth area of concern mentioned by the court in its opinion is what is labeled the "Government's pervasive lack of candor. It is clear beyond any doubt," the court elaborated, "that misrepresentations were made to the court from the beginning of the evidentiary hearing and there was virtually a wholesale failure of recall of critical events by relevant Government witnesses and no such failure by the defendant's witnesses. At the least, this failure constitutes a lack of candor. The primary but not the sole offender is the assistant U.S. attorney." The court concluded by finding that "the Government's conduct was patently egregious and cannot be tolerated or condoned. Its manner of proceeding shocks the court's conscience." It is of particular note also that the Federal district judge, Mr. Black, is a former U.S. attorney and obviously one who is very familiar with proper procedures from his personal experience. I will place in the record a copy of this opinion so it will be available to those who are following this proceeding. Decisions such as the two I have discussed in the last few minutes cannot be taken lightly, in my opinion. They raise serious concerns about the Government's prosecution of at least these two cases. If it is only these two cases, then there is an element of injustice to the people directly involved; but what is really before this committee, it seems to me, is first whether or not this is a pattern, whether or not there is a tolerance of this kind of misconduct by Government employees and attorneys, and to what extent if any the rights of citizens and taxpayers are thereby prejudiced. They raise questions as to how and why the Government prosecutes, questions about what the Justice Department and IRS do with regard to persons found by a court to have been guilty of such misconduct, particularly in the Omni case since the attorney who was so severely criticized by the court had been, 5 years earlier, criticized for similar misconduct. It is my understanding-we will get this, I guess, from the Justice Department on Monday-but it is my understanding that to date no action either by the Justice Department or the IRS has been taken against any of the parties who were involved in the prosecution of either the Kilpatrick or Omni cases, not even-so far as I am advised-to the point of placing anybody on administrative leave until the matter is resolved. I want to now come to a close, but I think there is one other aspect of this that I want to make just for the record, and that is the question of the grand jury. That is going to be, I think, the focus of what Judge Winner will be talking about, at least at the outset. That is a central issue, possibly the most important issue in the Kilpatrick case. And I want to just insert in the record at this point a brief discussion from volume 45 of the Ohio State Law Journal which discusses the origins of the grand jury, and its place in our judicial systems. It will be well understood by the attorneys who are participating in this hearing today, but for those who have not thought extensively about this, let me just summarize in this way. The grand jury began as a device by which King Henry II sought to consolidate his power over the entire realm, literally, for the purpose of enabling the central government to have additional control over the administration of justice throughout the kingdom. But about 500 years later, during the reign of King Charles II, the central government and the King sought to convict the Earl of Shaffsbury and Steven College of treason. The grand jury asserted its independence and refused to return the indictment. Details of this are discussed in the material which I am going to put into the record from the Ohio State Law Journal; but that principle-independence of the grand jury, the integrity of the process, the role of the grand jury, not only in bringing to the bar of justice those persons who are accused of a crime, but also to defend the rights of persons who have business before the grand jury has been evolving ever since and is a central and, in my view, very significant part of our legal system, and a part which is seriously jeopardized by the conduct of Government employees and prosecutors in the Kilpatrick case. The prosecutor's role, whether before the grand jury or in subsequent prosecution of the case, has long been established and is well described in a Supreme Court decision, Berger v. United States, and I will quote briefly from it. The United States Attorney is the representative not of an ordinary party to a controversy, but a sovereignty whose obligation is to govern impartially, is as compelling as its obligation to govern at all, and whose interest therefore in a criminal prosecution is not that it shall win a case but that justice shall be done. As such, he is in a peculiar and very definite sense a servant of the law, the twofold aim of which is that guilt shall not escape or innocence suffer. He may prosecute with earnestness and vigor; indeed, he should do so, but while he may strike hard blows, he is not at liberty to strike foul ones. It is as much his duty to refrain from improper methods calculated to produce a wrongful conviction as it is to use every legitimate means to bring about a just one. And that, ladies and gentlemen, is exactly the issue which is before us today and in the subsequent hearings in this case. It is pretty clear-at least it is clear to me-that people whose duty was to be fair and impartial and to prosecute vigorously did exactly what the case I have just cited said they were not supposed to do; and that is they have struck some foul blows and that they have done so willfully and knowingly and repeatedly. What I want to find out, and what I intend to find out before we get done with this, is what the reaction is of those persons who are responsible for management of the IRS and the Department of Justice. It now gives me great pleasure to welcome to the committee Judge Fred M. Winner, who has served with distinction on the U.S. District Court for Colorado, who has recently retired from the court, and who is engaged in private practice in the Denver, CO law firm of Baker & Hostetler. Judge, would you join us up at the table, while I explain for the record that, born in Colorado, Judge Winner went to law school at the University of Colorado, was appointed to the Federal district court bench by President Nixon on December 18, 1970. I am very grateful to you, Judge, for coming to be with us today, for accepting my invitation to appear. And it would be my hope that you would simply share with us your perspective as one who has been deeply and centrally involved in what has happened thus far. [A copy of the discussion of volume 25 of the Ohio State Law Journal and Judge Black's written opinion follow:] J. Freuerick Motz, Former United States Attorney for the District Harvin J. Garbis anu Garis & Schwait, of Baltimore, aryland: for defendant, Wayne J. Hilmer. Cono R. Namorato, Bernard S. Sailor, and Gaplin & Drysdale, of Brendan V. Sullivan, Jr., Barry S. Simon, and Williams & Connolly, of ashington, D.C.: for defendant, Thomas A. estrick, Jr. James E. Merritt, John W. Spiegel, and Horrison & Foerster, of ashington, D.C.: for defendant, Joseph P. Bornstein. Dlack, District Judge. On March 13, 1984 a grand jury returned a seven-count Indictment against Omni International Corporation, formerly known as Omni Investment Corporation, Wayne J. Hilmer, Evan T. Barnett, Thomas A. Westrick, Jr., and Joseph P. Bornstein. The five defendants each were charged with conspiracy to defraud the Internal Revenue Service, conspiracy to commit income tax evasion, five counts |