Babenko v. Federal Trade Commission
Filing
7
ORDER denying 1 Motion to Quash Subpoena and closing this case. Signed by Magistrate Judge Stephanie K. Bowman on 3/22/12. (jl1)
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
NATALIYA BABENKO,
Case No. 1:12-mc-006
Movant,
Weber, J.
Bowman, M.J.
v.
FEDERAL TRADE COMMISSION,
Defendant.
MEMORANDUM ORDER
On February 24, 2012, Nataliya Babenko, through counsel, (“Movant”) filed a Motion
seeking to quash a Subpoena issued to Fifth Third Bank by the Federal Trade Commission
(“FTC”).
Nataliya Babenko is married to Kevin Trudeau, a telemarketer and
“informercialist.” Mr. Trudeau is currently under order from the Northern District of Illinois
to pay the FTC $37.6 million as a civil contempt sanction, based upon his violation of a
final order entered by that court in 2004. See FTC v. Trudeau, 708 F. Supp.2d 711 (N.D.
Ill. 2010), aff’d 662 F.3d 947 (7th Cir. 2011). The FTC represents that Trudeau has made
no payments to date, based upon a disputed inability to pay.
The Subpoena that Movant seeks to quash seeks documents “referring to or relating
to the Subject Account,” defined as “any bank account in the name of: (1) Kevin M.
Trudeau, and any account for his benefit or for which he is a signatory or authorized user;
(2) Global Information Network FDN...; and (3) Nataliya Babenko...and any account held
for her benefit or for which she is a signatory or authorized user.” (Doc. 2-1 at 11). Movant
filed her motion pursuant to Section 1110 of the Right to Financial Privacy Act of 1978
(“RFPA”), 12 U.S.C. §3410, in order to prevent the FTC from obtaining access to Movant’s
personal financial records.
The referenced statute permits a customer to move to quash a subpoena to prevent
the Government authority from obtaining financial records, upon a showing by “affidavit or
sworn statement” that “the financial records sought are not relevant to the legitimate law
enforcement inquiry stated by the Government authority in its notice, or that there has not
been substantial compliance with the provisions of this chapter.” 12 U.S.C. §3410(a)(2).
Movant attached a sworn statement to her motion, but sought and was initially granted
leave by this Court to file that statement under seal based upon Mr. Trudeau’s assertion
of “spousal privilege.”
In its response to Movant’s motion to quash, the FTC - which has been prevented
from reviewing Movant’s sworn statement- vehemently contests the applicability of any
spousal privilege. After further review, the Court agrees that no spousal privilege applies
to Movant’s sworn statement that would entitle it to remain under seal. The spousal
privilege, like all privileges, is strictly construed. Only the marital communications spousal
privilege, and not the testimonial spousal privilege, has any potential application here. See
United States v. Porter, 986 F.2d 1014, 1018 (6th Cir. 1993)(only a testifying spouse can
assert the adverse testimony spousal privilege, whereas the confidential communications
privilege can be asserted by either spouse).
The marital communications privilege applies only to utterances or expressions
intended by one spouse to convey a message to the other, made in confidence. Id.; see
also Pereira v. United States, 347 U.S. 1, 6 (1954). The privilege may not apply to
objective facts related to third parties. See United States v. Klayer, 707 F.2d 892, 894 (6th
Cir. 1983)(conviction on insurance fraud did not violate privilege where wife testified that
they did not own a silver tea tray, because privilege did not apply to objective fact
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concerning ownership). Bank documents, which constitute communications to a third
party, generally are not considered to be subject to the spousal communications privilege.
See Aetna Group USA, Inc. v. AIDCO Int’l, Inc., 2011 WL 2295137 (S.D. Ohio June 8,
2011)(holding that financial documents were not subject to privilege); compare Nimmer v.
U.S. S.E.C., 2011 WL 3156791 (D. Neb. July 26, 2011)(denying motion to quash subpoena
for bank records under RFPA and holding such records are not subject to attorney-client
privilege).
In addition, larger public policy concerns justify limits on the privilege. See United
States v. Sims, 755 F.2d 1239(6th Cir. 1985)(reasoning that “the goals of protecting marital
privacy and of encouraging frank marital communications do ‘not justify assuring a criminal
that he can enlist the aid of his spouse in a criminal enterprise without fear that by
recruiting an accomplice or co-conspirator he is creating another potential
witness.’”)(citation omitted); see also Ranney-Brown Distributors, Inc. v. E.T. Barwick
Indus., Inc., 75 F.R.D. 3, 5 (S.D. Ohio 1977)(“A claim of privilege cannot be used as a
means to conceal assets to prevent execution of judgment.”)(citation omitted). Based upon
the Court’s conclusion that the spousal privilege does not apply, the Court will unseal
Movant’s sworn statement. See also, generally, In re Knoxville News-Sentinel Co., Inc.,
723 F.2d 470, 476 (6th Cir. 1983)(“Only the most compelling reasons can justify nondisclosure of judicial records.”); see also Brown & Williamson Tobacco Corp. v. FTC, 710
F.2d 1165, 1179 (6th Cir. 1983), cert. denied, 465 U.S. 1100 (1984)).
The Court further finds that the motion to quash the subpoena must be denied. The
sole basis provided by Movant for quashing the subpoena is her contention that her
personal financial records are not relevant to the FTC’s investigation of her husband. In
her affidavit, Ms. Babenko represents that bank records in her name reflect an account
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held exclusively in her name and used for her personal purposes, that no payments have
been made from the account to Kevin Trudeau or to any company he owns, and that no
monies have been deposited into the account from Trudeau or any company he owns.
(Doc. 3).
The Movant bears the initial burden of showing the records are not relevant, see
Karlis v. S.E.C., 613 F. Supp.2d 150, 153 (D. Mass. 2009). However, to the extent that the
mere filing of a motion to quash shifts the burden to the FTC, I find that the FTC has more
than satisfied its burden to demonstrate relevance. See Carillo Huettel v. U.S. S.E.C.,
(S.D. Cal. Feb. 11, 2011)(implying that government bears the burden to establish
relevance in response to motion).
Pursuant to the statute, the Court must deny the motion to quash if “there is a
demonstrable reason to believe that the law enforcement inquiry is legitimate and a
reasonable belief [exists] that the records sought are relevant to that inquiry.” 12 U.S.C.
§3410(c). Ms. Babenko does not deny that she is Mr. Trudeau’s spouse, whose records
are sought by the same subpoena. As in Karlis v. S.E.C., another case in which a wife
claimed to have no involvement in her husband’s illicit financial dealings, I conclude that
the evidence submitted by the FTC here is more than adequate to prove the subpoena is
based upon a legitimate law enforcement inquiry relating to Mr. Trudeau, and the FTC’s
reasonable belief that the records sought are relevant.
The FTC has submitted information that Movant provided one or more loans to Mr.
Trudeau (see Doc. 6, Page ID# 59 and 64), and that she serves as president of one of Mr.
Trudeau’s companies (Id. at Page ID# 58), in addition to having a close familial relationship
as his spouse. See generally Nat’l Union Fire Ins. Co. of Pittsburgh v. Van Waeyenberghe,
148 F.R.D. 256, 256-257 (N.D. Ind. 1993)(“[I]t should be beyond question that a judgment
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creditor is allowed to ask a judgment debtor for asset and financial information relating to
the debtor’s spouse or other family members.”). Mr. Trudeau and Ms. Babenko were
married in June of 2008, after he had been held in contempt but just before the $37.6
million contempt sanction was first entered against him. The FTC does not need concrete
proof of intermingling of finances or transfers between Ms. Babenko and Mr. Trudeau, but
only such proof as to evidence a “reasonable belief” that Movant’s records are relevant to
the investigation of her husband’s debt. Accord, U.S. S.E.C. v. DiBella, 2009 WL 1561596
(D. Conn. June 1, 2009)(holding that the fact that wife is not a party has no direct bearing
on the relevance of her bank account to the investigation of her husband).
Accordingly, for the reasons stated herein, IT IS ORDERED:
1. Movant Nataliya Babenko’s Motion for Order Quashing Subpoena (Doc. 1) is
DENIED;
2. This miscellaneous case shall be closed.
s/ Stephanie K. Bowman
Stephanie K. Bowman
United States Magistrate Judge
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