The opinion of the court was delivered by: ROVNER
ILANA DIAMOND ROVNER, UNITED STATES DISTRICT JUDGE.
Pursuant to the Right to Financial Privacy Act, 12 U.S.C. § 3401 et seq. ("RFPA"), Thomas W. Collins, Barbara Collins, Daniel J. Collins, Edward M. Collins, John R. Wade, Bernard J. Miraglia, and Lake States Commodities (collectively, "movants") have moved to quash four subpoenas issued by the Commodity Futures Trading Commission (the "CFTC"). The CFTC issued these subpoenas in connection with an investigation in which it seeks to determine whether Lake States Commodities, Inc., its president, Thomas W. Collins, or its secretary, Edward M. Collins, accepted funds from investors for purposes of trading commodity futures without registering with the CFTC and/or issued a false commodity futures trading account statement to a third party. The subpoenas were served not upon movants themselves, but upon three banks at which movants maintain accounts. Movants challenge the subpoenas as customers of the banks. Pending before the Court are fifteen motions filed by movants individually to quash the four subpoenas.
The motions have been consolidated before this Court for resolution. For the reasons set forth below, the Court denies the motions.
The following factual summary is based largely upon the memorandum which the CFTC has filed in opposition to the motions to quash and which describes the nature of its ongoing investigation. With certain exceptions, the facts asserted in that memorandum are not disputed by movants, and the Court has assumed the uncontested facts to be true for purposes of resolving the pending motions. Where movants have contested particular factual representations made by the CFTC, the Court has noted the dispute and summarized the conflicting representations. However, as explained more fully below, none of the factual disputes between the parties are material to resolution of the motions. Thus, it is unnecessary to obtain further factual submissions from the parties or to conduct an evidentiary hearing before addressing the merits of the motions to quash.
Lake States Commodities, Inc. ("Lake States") is an Illinois corporation first incorporated in 1984 by Thomas W. Collins. The stated purpose of the corporation was to trade commodity futures for its own account. Lake States was dissolved on January 2, 1988 after it failed to file an annual report and pay an annual franchise tax. However, it was re-incorporated under the same name and for the same purpose on March 3, 1988. The Annual Report filed with the Illinois Secretary of State on February 21, 1989 lists Thomas W. Collins as the president/director of Lake States and Edward M. Collins as the secretary/director. Daniel J. Collins, James J. Collins, John R. Wade, Bernard J. Miraglia, and Timothy A. Gianos are listed as directors. The report reflects a business address for Lake States of 1873 Hicks Road in Rolling Meadows, Illinois.
In early October, 1989, the CFTC's Division of Enforcement (the "Division") learned from an unidentified source that Lake States and Thomas W. Collins (hereinafter "Collins") might have accepted funds from third party investors for purposes of trading commodity futures without having registered as a futures commission merchant
with the CFTC, and might also have issued a false commodity futures trading account statement to third parties in connection with futures trading. Later in October, an informant provided the Division with a copy of a trading account statement issued by Heinold Commodities, Inc. ("Heinold Commodities") of Chicago, Illinois. The statement was addressed to "Thomas W. Collins/Heinold Mngmt. Inc." at 1873 Hicks Road, Suite A & B, Rolling Meadows, Illinois. The statement reflected various transactions and trade positions for a period of time ending June 30, 1989. Among the transactions listed was a "Lake States Day Trade" which had generated a credit in the amount of $ 493,406.00. The statement reflected a total account value of $ 38,892,759.31.
On October 23, 1989, the Division opened an investigation of Collins and Lake States. At some time before October 30, 1989, the Division requested that Geldermann, Inc. ("Geldermann"), a registered futures commission merchant, provide it with copies of account statements and other records for commodity futures trading accounts associated with Collins and Lake States. Certain commodity accounts held by Geldermann had previously been held by Heinold Commodities. Geldermann complied with the Division's request, and produced certain records before October 30, 1989 and others at a later date. From the records produced prior to October 30, 1989, the Division learned that Collins was associated with numerous accounts at Geldermann, in one instance as the sole owner of the account and in other instances as a joint owner with other persons. The records reflected large deposits and withdrawals in these accounts. The account held solely in Collins' name showed more than $ 3,148,000 in deposits and $ 3,574,000 in withdrawals during a period from January to September of 1989, for example. Certain of the deposits to that account were made in the form of cashier's checks issued by the American National Bank of Arlington Heights ("ANB"). Checks issued by the Collins account were in many instances deposited by Collins into Account No. 102257301 at ANB. Other checks issued by the account were endorsed over to various individuals.
From additional records which Geldermann produced after October 30, 1989, the Division determined that other deposits into the Collins trading account were made in the form of cashier's checks issued both by ANB and Palatine National Bank, which later became the Suburban National Bank of Palatine ("Palatine Bank"). Additional deposits into that account were made by checks which bore the names of "Thomas W. and Barbara Collins" and were drawn on Account No. 102257301 at ANB. Still other funds deposited into the trading account originated from Account No. 66-332503 at Heritage Bank of Schaumburg ("Heritage Bank"). Certain funds withdrawn from the trading account were deposited into the same Heritage Bank account.
On October 24 and 27, 1989, Bryan L. Cannon ("Cannon"), who works for the Division as a Supervisory Futures Trading Investigator, spoke with an unnamed individual regarding a $ 50,000 commodity futures investment he had made with Lake States. The investor provided Cannon with a variety of information about his trading account, and indicated that the names of Lake States and Heinold appeared on the monthly account statements that he received.
On the afternoon of October 30, 1989, Cannon, Robert Riley (another Division investigator), and William P. Janulius (a Division trial attorney), visited the offices of Lake States at 1873 Hicks Road in Rolling Meadows. The circumstances of this visit are also disputed to a degree. Cannon and Janulius assert that upon their arrival at Lake States, Cannon introduced each member of the delegation to Collins and explained that they were reviewing the trading activities of Collins and Lake States. (Janulius Aff. paras. 4-5; Cannon Aff. paras. 12, 17.) Cannon, Riley, and Janulius then questioned Collins for a period of approximately 30 to 45 minutes. (Janulius Aff. paras. 9, 10; Cannon Aff. para. 12.)
This much is agreed upon. (See Collins Aff. paras. 3, 5.) However, Collins asserts that at the outset of the interview, when he asked whether he was under investigation, Janulius indicated that their visit was informal and that Collins did not need an attorney present. (Id. para. 4.) Janulius denies labelling their visit informal, but acknowledges that Collins did ask whether he was being charged with anything by the CFTC. Janulius recalls that either he or Cannon told Collins that the CFTC had not yet made any formal charges, and that the purpose of their visit to Lake States was to determine whether such charges were called for. (Janulius Aff. paras. 6-8.) Cannon concurs. (Cannon Aff. paras. 13-14.) Collins also asserts that during the questioning, he indicated that he would like to have his attorney present, but Janulius repeated that it was unnecessary. (Collins Aff. para. 5.) Janulius and Cannon both deny that Collins ever asked whether he could have an attorney present or that Janulius, Cannon, or Riley ever assured him he did not need one. (Janulius Aff. paras. 11, 12; Cannon Aff. paras. 15-16.) Finally, Collins asserts that the questioning ended when he realized that the interview was not informal and he refused to answer any further questions without an attorney present. He claims that at that time, Janulius handed him a subpoena requesting documents and certain information. (Collins Aff. paras. 7, 8.) Janulius and Cannon deny that Collins terminated the questioning, and maintain that the interview ended cordially. They also deny that they handed him a subpoena; they claim that what they gave him was simply a written request for certain records. According to them, Collins indicated that he would have to go over the request with his attorney, and they told him that was acceptable. (Janulius Aff. paras. 14-16; Cannon Aff. paras. 25-26.)
It shall be unlawful . . . for any person, in or in connection with . . . the making of any [commodity futures contract] . . . for or on behalf of any other person . . . willfully to make or cause to be made to such other person any false report or statement thereof, or willfully to enter or cause to be entered for such person any false record thereof . . . .
As noted previously, Division staff had certain information which suggested that Collins and Lake States might have issued a false commodity futures trading statement to a third party. The record presently before the Court reveals nothing about the nature of the false statement or to whom it was issued. The Division had also been informed that Collins and Lake States might have been engaged in unauthorized futures trading. Such conduct implicates § 6d(1), which provides:
It shall be unlawful for any person to engage as a futures commission merchant . . . in soliciting . . . or accepting orders for . . . [commodities futures contracts] . . . unless . . . such person shall have registered. . . with the Commission as [a] futures commission merchant.
Under the authority of the Order, Cannon issued subpoenas to Collins and to his business partners and family members on December 22, 1989. According to Janulius, movants' counsel was shown a copy of the Order on December 28, 1989. (Janulius Aff. para. 18.)
On February 28, 1990, the Division issued the four subpoenas for bank records to ANB, Palatine Bank, and Heritage Bank. Each subpoena requests records pertaining to a particular account:
1. ANB Account No. 3300030803: In an undated letter received by the Division on February 20, 1990, ANB indicated that this is a partnership account held in the name of Lake States Commodities. A Partnership Account agreement for this account dated April 7, 1989 was signed by Thomas W. Collins, Daniel J. Collins, Edward M. Collins, Bernard J. Miraglia, and John R. Wade. It appears that a number of cashier's checks deposited into Collins' trading account with Geldermann may have originated from this partnership account.
3. ANB Account No. 102257301: This is a joint checking account held in the names of Thomas W. and Barbara Collins. As previously noted, the Division's review of the Geldermann trading account records indicated that certain withdrawals from the Collins trading account were deposited into this bank account, and likewise certain deposits into the trading account originated in this bank account. (Cannon Aff. paras. 7-8.)
4. Heritage Bank Account No. 66-332503: This is another joint checking account held in the names of Thomas W. and Barbara Collins. As with the ANB joint checking account above, the Geldermann records indicated that certain deposits to or withdrawals from the Collins trading account were made from and to this account at Heritage Bank. (Cannon Aff. para. 8.)
Each of the four subpoenas was issued in accordance with the terms of the RFPA.
B. Relevant Provisions of the RFPA
The RFPA imposes certain limitations and conditions upon the disclosure of bank records to government authorities. Section 3402 imposes a general bar to government access to the financial records of a customer of a financial institution, with certain exceptions. Most importantly for present purposes, disclosure is permitted if it is in response to an administrative subpoena which ...