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United States v. Klehman

July 3, 1968


Schnackenberg, Kiley and Fairchild, Circuit Judges.

Author: Fairchild

FAIRCHILD, Circuit Judge.

Appellant here is Joseph S. Klehman, president of Wilmington Chemical Corporation. An information charged that the corporation and Klehman violated the Federal Hazardous Substances Labeling Act.*fn1 Each of ten counts alleged an interstate shipment of X-33 Water Repellent, allegedly hazardous, extremely flammable, and in a package which was misbranded in that the label did not contain warnings and precautionary instructions.

Klehman claimed immunity from prosecution by virtue of testimony he had given, under subpoena, before the Federal Trade Commission.

Klehman's motions were denied.*fn2

The corporation then entered a plea of guilty. Klehman entered a plea of nolo contendere, upon condition that he have the opportunity to raise his claim of immunity upon appeal. The district court accepted the plea upon that condition, and judgment was entered and fine imposed. Klehman appealed.

The proceeding before the Federal Trade Commission was brought pursuant to 15 U.S.C. sec. 45(b). The complaint named both the corporation and Klehman and alleged that in connection with marketing of X-33, they engaged in unfair methods of competition and unfair and deceptive acts and practices in commerce, mainly false and deceptive assertions as to the merits of X-33. 15 U.S.C. sec. 49 confers subpoena power on the commission, provides that no person shall be excused from testifying on the ground of self-incrimination, and that "no natural person shall be prosecuted * * * for or on account of any transaction, matter, or thing concerning which he may testify * * * before the commission in obedience to a subpoena issued by it * * *."

This is the type of immunity statute which does not require the witness, in order to gain immunity, to claim his privilege before being required to answer.*fn3

The question presented here is whether the testimony given by Klehman before the Federal Trade Commission "would furnish a link in the chain of evidence needed to prosecute," and whether Klehman had "reasonable cause to apprehend danger from a direct answer."*fn4

Assuming that the government could establish that unlawful shipments were made on behalf of the corporation, it would be necessary, in order to convict Klehman, to produce proof that he had "a responsible share in the furtherance of the transaction."*fn5 Evidence tending to show that during the period these shipments were made he exercised close control of all details of the corporate activity would be a substantial link in the chain of evidence.

A portion of Klehman's testimony before the Federal Trade Commission (all in response to questions by the commission's attorney) may be summarized as follows:

Klehman was president of the corporation. He owned all the stock. The only other director he could recall was his personal secretary, who was also secretary of the corporation. Directors' meetings were held when necessary to fulfill formal requirements. The maximum number of employees was 25. There were five or six at the time of the first shipment of X-33 on April 9, 1962. Klehman hired them. He had actual control of the company and the employees did only what they were told. He formulated the policy. He personally supervised the advertising material used to promote X-33.

It is true that the F.T.C. proceeding was directed against making deceptive claims of the merits of X-33 while the offense now charged was the failure to warn of its dangers. The administrative proceeding and the criminal prosecution were, however, closely related in a number of particulars.

Both involved the marketing of X-33. The F.T.C. proceeding included the same period of time. The complaint was issued October 28, 1964, and alleged the marketing of X-33 from some date after September 23, 1961 to the date of the complaint. The shipments charged in the information occurred from April 7, 1962 to June 19, 1962. The complaint named both Klehman and the corporation (as did the information) and alleged, presumably as the basis for naming Klehman individually, "He formulates, directs and controls the acts and practices of the corporation ...

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