THE BANK OF NOVA SCOTIA, PETITIONER V. UNITED STATES OF AMERICA

   WILLIAM A. KILPATRICK, ET AL., PETITIONERS V. UNITED STATES OF
AMERICA

   No. 87-578, 87-602

   In the Supreme Court of the United States

   October Term, 1987

   On Writ of Certiorari to the United States Court of Appeals for the
Tenth Circuit

   Brief for the United States

                      PARTIES TO THE PROCEEDINGS

   In addition to the parties named in the caption, the following
individuals were appellees in the court of appeals and are petitioners
here:  Declan J. O'Donnell and Sheila C. Lerner.  Michael Alberga and
C.S. Gill were also appellees in the court of appeals but are not
petitioners here.

            TABLE OF CONTENTS
   Question Presented
   Parties to the Proceedings
   Opinions below
   Jurisdiction
   Statute and rules involved
   Statement
   Summary of argument
   Argument:
      I. An indictment may not be dismissed for grand jury
         abuse in the absence of prejudice to the defendant
         A. A facially valid indictment is ordinarily immune
            from challenge based on alleged defects in the
            grand jury process
         B. Dismissal of an indictment in the absence of
            prejudice would conflict with 28 U.S.C. 2111
            and Fed. R. Crim. P. 52(a)
         C. This Court's decisions compel the conclusion
            that an indictment may not be dismissed for
            procedural irregularities in the grand jury in the
            absence of prejudice
         D. Dismissal of an indictment for procedural
            defects in the grand jury that do not affect the
            grand jury's charging decision would be unsound
            as a matter of policy
     II. Dismissal of the indictment would be inappropriate
         in this case even if an indictment may be dismissed
         without a showing of prejudice
         1. Use of the term "agents of the grand jury"
         2. Presentation of summaries of evidence
         3. Mistreatment of an expert witness
         4. Granting informal immunity
         5. Calling witnesses who asserted their privilege
            against compulsory self-incrimination
         6. Violations of Rule 6(d)
         7. Alleged use of grand jury to gather
            information for civil purposes
         8. Disclosure of the identity of targets of the in-
            vestigation
         9. Imposition of secrecy obligations on two
            witnesses
   Conclusions

                            OPINIONS BELOW

   The opinion of the court of appeals (Pet. App. A1-A41) /1/ is
reported at 821 F.2d 1456.  The opinions of the district court (Pet.
App. C1-C55, D1-D35) are reported at 594 F. Supp. 1324 and 575 F.
Supp. 325.

                             JURISDICTION

   The judgment of the court of appeals was entered on June 18, 1987.
Petitions for rehearing were denied on August 19, 1987 (Pet. App.
B1-B3).  The petition for a writ of certiorari in No. 87-578 was filed
on October 9, 1987, and the petition in No. 87-602 was filed on
October 13, 1987.  Both petitions were granted on January 11, 1988,
limited to Question One presented by each petition.  The jurisdiction
of this Court is invoked under 28 U.S.C. 1254(1).

                      STATUTE AND RULES INVOLVED

   28 U.S.C. 2111 and Rules 6(d), 6(e), and 52(a) of the Federal Rules
of Criminal Procedure are set out in an appendix to this brief.

                          QUESTION PRESENTED

   Whether a district court may dismiss an indictment for misconduct
in the course of a grand jury investigation, where the misconduct has
not prejudiced the defendants.

                               STATEMENT

   1. This case stems from a 20-month investigation conducted by two
successive grand juries.  Two attorneys from the Tax Division of the
Department of Justice assisted the grand juries.  The attorneys, in
turn, were assisted by personnel from the Internal Revenue Service
(IRS).  In September 1982, a 27-count indictment was returned charging
petitioners and others (in various combinations) with conspiracy, in
violation of 18 U.S.C. 371;  willfully aiding and assisting in the
preparation and presentation of false tax returns, in violation of 26
U.S.C. 7206(2);  willfully making and subscribing false individual tax
returns, in violation of 26 U.S.C. 7206(1);  mail fraud, in violation
of 18 U.S.C. 1341;  and obstruction of justice, in violation of 18
U.S.C. 1503.

   The district court initially dismissed all but one of the counts
for failure to state an offense.  Petitioner Kilpatrick went to trial
and was convicted on the one remaining count (obstruction of justice).
 The government appealed the dismissal of the other 26 counts.  Before
argument, the court of appeals granted a defense motion to remand the
case to the district court for the purpose of determining whether
prosecutorial misconduct during the grand jury proceedings constituted
another basis for dismissal.  On remand, the district judge granted a
new trial to petitioner Kilpatrick on the obstruction of justice count
and ordered disclosure of the grand jury transcripts.  Because he was
retiring from the bench, that district judge did not decide whether
the indictment should be dismissed for prosecutorial misconduct;
instead, the cases were reassigned to another judge.  Pet. App. A2 &
n.2, D26-D33.

   The newly assigned judge, after conducting a hearing, dismissed all
27 counts of the indictment (Pet. App. A2, C54-C55).  The court held
that the government had violated Fed. R. Crim. P. 6(e) by disclosing
grand jury materials to IRS employees having civil tax enforcement
responsibilities (Pet. App. C37-C40), by failing to provide prompt
notice to the court of disclosures of grand jury materials (id. at
C38), by disclosing to potential witnesses the names of targets of the
investigation (id. at C40-C41), and by instructing two grand jury
witnesses that they were not to reveal the fact that they had
testified before the grand jury or the substance of their testimony
(id. at C41).  In addition, the court held that the government had
violated Fed. R. Crim. P. 6(d) because IRS agents made joint
appearances before the grand jury for the purpose of reading
transcripts to the jurors (Pet. App. C7-C8, C35-C36).

   The court also found that the prosecutors engaged in other forms of
improper conduct in the course of the grand jury investigation.  The
court found that one of the prosecutors was guilty of misconduct when
he argued with an expert witness, during a grand jury recess, after
the witness had given testimony favorable to the defense (Pet. App.
C33-C34).  In addition, the court held that the government violated
the witness immunity statute (18 U.S.C. 6002, 6003) by the use of
"pocket immunity" or "letters of assurance" (Pet. App. C44-C46).  The
court also found that the government presented "questionable hearsay"
to the grand jury (id. at C47), that it improperly called several
witnesses for the sole purpose of having them assert their privilege
against compelled self-incrimination (id. at C46-C47), and that it
violated the Sixth Amendment by conducting post-indictment interviews
of several high-level employees of the Bank of Nova Scotia without
notifying counsel for the Bank (id. at C47-C49).  The court also found
that the independence of the grand jury was compromised because IRS
agents were sworn as "agent(s) of the grand jury" (id. at C3-C8), and
it found that one of the agents gave an inaccurate summary of evidence
obtained from other witnesses (id. at C25-C30).

   The district court held that the indictment should be dismissed
because of the Rule 6(d) and (e) violations and because of the
"totality of the circumstances" surrounding the grand jury
investigation (Pet. App. C54-C55).  The court found that the conduct
of the government was prejudicial to the defendants because the grand
jury "was converted into little more than a rubber stamp" (id. at
C53-C54).  In addition, the court found that, wholly apart from any
prejudice, dismissal was appropriate as an exercise of the court's
"supervisory authority" (id. at C53).

   2. The court of appeals reversed the order of dismissal and
remanded the case with directions to reinstate all the counts of the
indictment (Pet. App. A1-A33).  After first concluding that the
indictment was legally sufficient (id. at A3-A11), the court of
appeals reviewed in detail the various grand jury violations found by
the district court.  The court stated that, based on its review of the
record, it was "not persuaded by the several reasons given for the
dismissal" (id. at A21).  The court noted that the use of summaries of
evidence is "permissible and often helpful, especially in complicated
cases such as this" (ibid.);  it stated that the use of "informal
immunity" was "entirely proper" and that, in any event, "the
defendants have failed to show how the use of informal immunity
prejudiced the grand jury" (id. at A22 (footnote and citation
omitted));  and it held that the government's post-indictment
questioning of bank employees "could not possibly have affected the
grand jury's charging decision" (ibid.).  The court also held that the
presence of more than one IRS agent in the grand jury room for the
purpose of reading transcripts, while it violated Rule 6(d), did not
warrant dismissal of the indictment because it did not prejudice the
defendants (Pet. App. A22-A23).  /2/

   In addition, the court of appeals found no support for the district
court's conclusion that government attorneys "'relinquished to the IRS
their responsibility to determine the persons to whom disclosure would
be made'" (Pet. App. A23 (quoting district court opinion)) or its
conclusion that IRS agents "manipulated the grand jury" in order to
"obtain materials for (use in) civil litigation" (ibid.).  The court
also noted that, "(a)ssuming that (the) allegation" of improper
disclosure of grand jury materials to civil IRS agents "finds support
in the record," the grand jury's independence was not "usurped in such
a significant way as to amount to grand jury abuse" (id. at A24
(citation omitted)).  In addition, the court observed that "(t)he aid
of IRS experts was essential to a complete understanding of the case"
and that "(t)he fact that some of the IRS personnel assigned to the
grand jury investigation were from the civil division is by itself not
sufficient to show grand jury abuse" (ibid.).  The court cited the
grand jury's return of a multi-count indictment as "probative evidence
that it was not abused to obtain evidence for civil purposes" (id. at
A25 (footnote omitted)).

   The court of appeals also held that the grand jury's independent
judgment was not impaired by the disclosure of the identity of the
targets of the investigation to various potential witnesses or by the
unauthorized instructions of secrecy that were given to two witnesses
at the time they testified before the grand jury (Pet. App. A25).
Regarding the term "agents of the grand jury" that was applied to
certain IRS atents, the court -- without deciding whether the use of
that term was improper -- found that its use did not prejudice the
defendants (id. at A25-A26).  Similarly, the court found dismissal of
the indictment was not justified on the ground that several witnesses
who intended to invoke the privilege against compelled
self-incrimination were called before the grand jury.  The court noted
that the witnesses' expression of an intention to invoke the privilege
"cannot be transformed into a prohibition against inquiry" and that
"(o)nce the privilege was invoked on the (r)ecord, the prosecutors
discontinued all questioning" (id. at A26-A27 (footnote omitted)).
And the court found that an incident in which one of the prosecutors
engaged in an argument with an expert witness during a grand jury
recess, while unjustifiable, did not affect the grand jury's
independence (id. at A27).

   The court noted that a "presumption of regularity * * * attaches to
grand jury proceedings" (Pet. App. A27 (citation omitted)), and it
found that petitioners had failed to overcome that presumption.  It
observed that the grand jury transcripts revealed "an active,
independent, and questioning grand jury, familiar with the record, one
that thoughtfully questioned, rather than submitted to statements and
suggestions of the Government attorneys" (id. at A27-A28 & n.20
(citing numerous examples)).  In addition, the court pointed out that,
as reflected in the grand jury transcripts, "the prosecutors
frequently reminded the grand jury of its independence and duty to
make its own assessment of the evidence introduced before it" (ibid.
(quoting examples)).  The court noted that "(t)he district court erred
in focusing primarily on the propriety of the Government's conduct
rather than on possible interference with the integrity and
independence of the grand jury" (id. at A27-A28).

   Finally, the court of appeals held that "the drastic remedy of
dismissal of an indictment, whether premised on due process or
supervisory powers theories," could not be ordered in the absence of a
"significant infringement on the grand jury's ability to exercise
independent judgment" (Pet. App. A32 (footnote omitted)).  The court
noted that, in United States v. Hasting, 461 U.S. 499, 509 (1983),
this Court made clear that "errors that are harmless, including most
constitutional violations," must be ignored (Pet. App. A32 (footnote
omitted);  see also id. at A32 & n.23).

   Judge Seymour dissented (Pet. App. A34-A41).  In her view, a
showing of prejudice to the defense is not required in order for a
court to dismiss an indictment on the basis of its supervisory powers
(id. at A36-A40).  She concluded that on the facts of this case, "the
district court was within its discretion in exercising its supervisory
power to protect the integrity of the judicial process and to deter
illegal conduct" (id. at A40-A41 (citing Hasting, 461 U.S. at 505)).

                          SUMMARY OF ARGUMENT

   1. The issue in this case is whether a district court may dismiss
an indictment, in the exercise of its supervisory powers, for alleged
grand jury abuse that has not affected the grand jury's charging
decision.  This question must be answered in the negative for several
reasons.  First, dismissal of an indictment in the absence of
prejudice would violate the rule that "(a)n indictment returned by a
legally constituted and unbiased grand jury, * * * if valid on its
face, is enough to call for a trial on the merits." Costello v. United
States, 350 U.S. 359, 363 (1956).  Second, under 28 U.S.C. 2111 and
Fed. R. Crim. P. 52(a), federal courts are required to disregard
errors that do not affect substantial rights.  A court cannot ignore
those provisions simply by invoking its supervisory authority.  Third,
this Court has made clear in a variety of contexts that errors that
are nonprejudicial -- even constitutional errors -- do not warrant
dismissal of an indictment or reversal of a conviction.  See, e.g.,
United States v. Hasting, 461 U.S. 499 (1983);  United States v.
Morrison, 449 U.S. 361 (1981).  The principles established in those
cases are fully applicable here, since the errors in this case, for
the most part, are simply procedural violations of Fed. R. Crim. P.
6(d) and (e).  Finally, a rule authorizing dismissal of an indictment
in the absence of prejudice would be unsound as a policy matter.  Such
a rule would exact substantial costs, particularly when the indictment
stems from a lengthy and complex investigation.  The objective of
deterring governmental misconduct can be achieved as effecitvely, if
not more so, in other less drastic ways, such as by disciplining the
prosecutors who engaged in the misconduct.  Furthermore, absent a
requirement of prejudice, the courts would lack concrete standards to
apply in deciding whether to dismiss an indictment.  The result of
adopting petitioners' position would be to provoke pretrial litigation
and produce disparate, ad hoc judgments among courts as to when to
dismiss indictments because of grand jury abuse.  In short, there is
no sound legal or policy basis to justify dismissing an indictment
where the defendant has not been prejudiced.

   2. Even if dismissal of an indictment were appropriate in the
absence of prejudice, dismissal would not be warranted here.  To began
with, there is no evidence that the misconduct found in this case is
symptomatic of a longstanding problem involving other prosecutors and
other cases.  Thus, the exercise of supervisory authority is not
necessary to deter widespread abuse.  Moreover, apart from the
isolated errors that were committed, the record shows that the
prosecutors in this case acted fairly and professionally.  The record
further shows that the grand jury was active and inquisitive, and that
it retained its independent role throughout the investigation.
Finally, as we demonstrate below, petitioners greatly exaggerate the
seriousness of the alleged errors.  In some instances the claims of
error involve conduct that is entirely lawful.  In the other
instances, the errors constitute at worst oversights or exercises of
poor judgment by the prosecutors, rather than deliberate efforts to
undermine the integrity of the grand jury.  In the context of a
20-month investigation, those errors do not warrant the extreme
sanction of dismissal of the indictment.

                               ARGUMENT

   I. AN INDICTMENT MAY NOT BE DISMISSED FOR GRAND JURY ABUSE IN THE
ABSENCE OF PREJUDICE TO THE DEFENDANT

   A. A Facially Valid Indictment Is Ordinarily Immune From Challenge
Based On Alleged Defects In The Grand Jury Process

   In Costello v. United States, 350 U.S. 359, 363 (1956), this Court
stated that "(a)n indictment returned by a legally constituted and
unbiased grand jury, like an information drawn by the prosecutor, if
valid on its face, is enough to call for a trial on the merits." See
also United States v. Calandra, 414 U.S. 338, 344-345 (1974);  Lawn v.
United States, 355 U.S. 339, 349 (1958);  Beavers v. Henkel, 194 U.S.
73, 84-85 (1904);  Bracy v. United States, 435 U.S. 1301, 1303 (1978)
(Rehnquist, Circuit Justice).  The Court in Costello held that the
Grand Jury Clause of the Fifth Amendment does not require that a
defendant be permitted to challenge an indictment on the ground that
the evidence before the grand jury was inadequate or incompetent.  In
addition, the Court refused to invoke its supervisory powers to
dismiss the indictment on that ground.  To accept such arguments, the
Court held, would "run counter to the whole history of the grand jury
institution, in which laymen conduct their inquiries unfettered by
technical rules" (350 U.S. at 364).

   The Costello rule reflects two fundamental considerations.  The
first is that the grand jury plays a discrete and limited role in the
criminal justice system.  A grand jury investigation is simply a
preliminary step in the prosecution process, a screening mechanism to
determine whether there is a sufficient basis to require the suspect
to stand trial before a petit jury.  See Calandra, 414 U.S. at
343-344, 349.

   In contrast to a criminal trial, with its array of procedural and
evidentiary safeguards, a grand jury investigation is a much less
formal proceeding, and it is not patterned on the traditional
adversary process.  The grand jury conducts its investigation ex parte
and receives evidence only from the prosecutor;  neither the suspect
nor his attorney is entitled to appear before the grand jury to
testify or present evidence, to cross-examine witnesses, or otherwise
to rebut the prosecutor's presentation.  See Calandra, 414 U.S. at
343-344.  The rules of evidence do not apply, and the grand jury is
free to consider hearsay or other incompetent evidence as well as
evidence that was illegally obtained.  Id. at 345;  Costello, 350 U.S.
at 363.  The standard governing the grand jury's deliberations is
probable cause, not proof beyond a reasonable doubt, and an indictment
may be returned if a bare majority of the grand jurors concur.  See
Fed. R. Crim. P. 6(a), (b)(2), (f).  Thus, in addition to its role as
an investigative body, the grand jury serves as a flexible and
informal device to screen out, at the beginning of the criminal
process, those cases in which further proceedings are unwarranted.
The informality and limited role of the grand jury in addressing the
question of guilt distinguishes the grand jury process sharply from
the trial before the petit jury, at which the issue of guilt or
innocence is decided.

   The second factor underlying the Costello rule is the recognition
that, in light of the nature and function of the grand jury, it would
impose significant and unjustified costs on the criminal justice
system to subject indictments to searching pretrial scrutiny and allow
them to be dismissed for procedural irregularity.  Litigation over
issues of grand jury irregularities would entail a substantial
expenditure of prosecutorial and judicial resources and would impede
the prompt adjudication of the central question in the case -- the
defendant's guilt or innocence.  See Costello, 350 U.S. at 363.  And
to dismiss a prosecution and require that the government seek a new
indictment not only entails delay, but in complex cases such as this
one it can result in a costly and onerous process of representing a
large quantity of evidence to a new grand jury.

   Because the Court in Costello had before it only the question
whether hearsay evidence alone could support a grand jury indictment,
the Court did not have to address the question whether an indictment
could ever be dismissed for flagrant abuses that so distored the grand
jury's role that the defendant was in effect deprived of his Fifth
Amendment right to be indicted by a grand jury.  At the least,
however, Costello sets the framework for that inquiry.  It makes clear
that if dismissal of an indictment for grand jury abuse is ever
appropriate, it cannot be based on mere technical errors or errors
involving evidentiary insufficiency.  It must be based on conduct that
so thoroughly distorts the grand jury process as to make it clear that
the grand jury has failed to perform its constitutional role.  Thus,
under the principles of Costello, dismissal of an indictment cannot be
ordered in the absence of a clear showing of prejudice to the
defendants.

   B. Dismissal Of An Indictment In The Absence Of Prejudice Would
Conflict With 28 U.S.C. 2111 and Fed. R. Crim. P. 52(a)

   Petitioners argue that the district court was entitled to dismiss
the indictment in this case in the exercise of its supervisory power
and that the court of appeals should have affirmed the dismissal order
on that ground.  To be sure, federal courts are authorized, within
limits, to "formulate procedural rules not specifically required by
the Constitution or the Congress." United States v. Hasting, 461 U.S.
499, 505 (1983).  A court's invocation of its supervisory power,
however, is subject to important limitations.  One of the most
significant is that a court may not devise a rule in the exercise of
its supervisory authority if that rule would conflict with some other
binding provision of law.  As this Court recently stated, "(e)ven a
sensible and efficient use of the supervisory power * * * is invalid
if it conflicts with constitutional or statutory provisions." Thomas
v. Arn, 474 U.S. 140, 148 (1985).  Accord Palermo v. United States,
360 U.S. 343, 353 n.11 (1959) ("The power of this Court to prescribe
rules of procedure and evidence for the federal courts exists only in
the absence of a relevant Act of Congress.");  United States v.
National City Lines, Inc., 334 U.S. 573, 589 (1948) ("(O)ur general
power to supervise the administration of justice in the federal courts
* * * does not extend to disregarding a validly enacted and applicable
statute or permitting departure from it.").  The principle that
federal courts, acting pursuant to their supervisory powers, may not
override congressional policies is obviously a sound one.  A contrary
principle "'would confer on the judiciary discretionary power to
disregard the considered limitations of the law it is charged with
enforcing.'" Thomas, 474 U.S. at 148 (quoting United States v. Payner,
447 U.S. 727, 737 (1980)).

   Permitting a district court to dismiss an indictment in the absence
of prejudice -- or an appellate court to affirm such a dismissal --
would be inconsistent with 28 U.S.C. 2111 and Fed. R. Crim. P. 52(a).
Section 2111 provides that an appellate court "shall give judgment * *
* without regard to errors or defects which do not affect the
substantial rights of the parties." Rule 52(a) provides that "(a)ny
error, defect, irregularity or variance which does not affect
substantial rights shall be disregarded." Both provisions reflect
Congress's judgment that prejudice is an essential prerequisite to
granting relief in a criminal case.  /3/

   As this Court has made clear, 28 U.S.C. 2111 and Rule 52(a) apply
not only to errors occurring at trial, but also to errors occurring
before the grand jury.  Thus, in United States v. Mechanik, 475 U.S.
66, 71-72 (1986), the Court stated that "(w)e see no reason not to
apply (Rule 52(a) to 'errors, defects, irregularities, or variances'
occurring before a grand jury just as we have applied it to such error
occurring in the criminal trial itself." The Court held that the
defendant's conviction at trial rendered harmless the violation of
Fed. R. Crim. P. 6(d) that occurred in that case (475 U.S. at 72-73).
In her concurring opinion in Mechanik, Justice O'Connor, joined by
Justices Brennan and Blackmun, expressed complete agreement with the
majority's ruling that Rule 52(a) applies to violations of Rule 6.
/4/ In reaching that conclusion, Justice O'Connor reviewed the history
of Rule 52(a).  She noted (475 U.S. at 75) that "(t)he Advisory
Committee's notes to Rule 52(a) state that '(t)his rule is a
restatement of existing law,' which specifically provided for a
harmless error analysis of objections going to the validity of the
indictment in 18 U.S.C. Section 556 (1946 ed.)." She further pointed
out (475 U.S. at 75) that "(t)he language of Rule 6 does not exempt
the Rule from a harmless error scrutiny" and that, to the contrary,
the commentary to Rule 6 expressly confirms "the rulemakers' intent
that violations of Rule 6(d) would be among those errors subject to
harmless error review."

   Petitioners appear to recognize that a court may not exercise its
supervisory power if to do so would violate Congress's intent.  Thus,
the Bank of Nova Scotia asserts that "(t)here is no doubt that
Congress intended that the dismissal sanction be employed in
appropriate situations for misconduct before the grand jury" (Br. 37
n.28).  See also id. at 36 (noting that "(d)ismissal implements the
essential rules established by Congress and this Court for the
administration of proceedings before federal grand juries").  Yet
neither petitioners nor amici explain how the position they urge --
i.e., that dismissal of an indictment is appropriate even in the
absence of prejudice (Kilpatrick Br. 7-26;  Bank Br. 30-42;  ACLU Br.
5-35;  NACDL Br. 6-27) -- can be reconciled with 28 U.S.C. 2111 and
Rule 52(a).

   At bottom, petitioners' argument consists of reasons why, in their
view, requiring proof of prejudice in connection with grand jury
misconduct would be unwise as a matter of policy.  While we disagree
with petitioners' analysis of the policy issues (see pages 22-26,
infra), the flaw in their argument is that, as 28 U.S.C. 2111 and Rule
52(a) demonstrate, Congress and this Court have already weighed those
policy considerations and have decided that errors that have not
prejudiced a defendant should not provide a basis for dismissing an
indictment.  See generally United States v. Widgery, 778 F.2d 325, 329
(7th Cir. 1985).  A court -- whether acting pursuant to its
supervisory authority or otherwise -- has no authority to disregard
that determination.

   C. This Court's Decisions Compel The Conclusion That An Indictment
May Not Be dismissed For Procedural Irregularities In The Grand Jury
In The Absence Of Prejudice

   Wholly apart from 28 U.S.C. 2111 and Fed. R. Crim. P. 52(a), this
case is controlled by numerous decisions of this Court holding that
nonprejudicial errors must be disregarded.  Those decisions, several
of which require a harmless error analysis even of constitutional
violations, cannot be meaningfully distinguished from the present
case.

   For example, in United States v. Morrison, 449 U.S. 361 (1981), the
Court held that an indictment should not be dismissed because of a
violation of the Sixth Amendment right to counsel that did not result
in prejudice to the defendant.  In Morrison, the court of appeals set
aside the defendant's conviction and dismissed the indictment, without
any showing of prejudice, because government agents had intentionally
sought to undermine the defendant's relationship with her attorney.
This Court reversed, holding that because the violation had no effect
on the criminal proceedings, the remedy fashioned by the lower court
was inappropriate.  The Court reasoned that "(t)he remedy in the
criminal proceeding is limited to denying the prosecution the fruits
of its transgression" (id. at 366).  According to the Court, "absent
demonstrable prejudice, or substantial threat thereof, dismissal of
the indictment is plainly inappropriate, even though the violation may
have been deliberate" (id. at 365 (footnote omitted)).  The Court
further noted (id. at 365-366) that the requirement of prejudice
applies not only in the Sixth Amendment context, but also in the
Fourth and Fifth Amendment contexts.  /5/

   In United States v. Hasting, supra, the Court held that a court may
not use its supervisory power to reverse a conviction based on a
prosecutor's improper comment on the defendant's failure to testify if
the error is harmless.  The Court noted (461 U.S. at 506) that
"(s)upervisory power to reverse a conviction is not needed as a remedy
when the error to which it is addressed is harmless since, by
definition, the conviction would have been obtained notwithstanding
the asserted error." The Court stressed that it "has consistently made
clear that it is the duty of a reviewing court to consider the trial
record as a whole and to ignore errors that are harmless, including
most constitutional violations" (id. at 509).  In addition, the Court
observed that "deterrence is an inappropriate basis for reversal"
where the prosecutor's violation is "attenuated" and "where means more
narrowly tailored to deter objectionable prosecutorial conduct are
available," such as disciplinary proceedings or "publicly chastis(ing)
the prosecutor by identifying him in (a judicial) opinion" (id. at 506
& n.5).  /6/

   To be sure, this Court has dispensed with harmless error analysis
in the case of certain types of errors, but those situations are
plainly "the exception and not the rule." Rose v. Clark, 478 U.S. at
578.  Recent decisions of this Court leave no doubt that courts must
apply the harmless error doctrine where an error, even a
constitutional one, is susceptible to meaningful harmless error
analysis, does not necessarily render the factfinding process
fundamentally unfair, and does not involve a right that protects
fundamental values unrelated to the factfinding process.  See id. at
576-579;  compare Young v. United States ex rel. Vuitton et Fils S.A.,
No. 85-1329 (May 26, 1987), slip op. 21-26 (plurality opinion)
(appointment of interested prosecutor raised doubt that prosecution
could be conducted in disinterested manner, created appearance of
impropriety to which harmless error analysis would not have been
sensitive, and did not lend itself to ready assessment of its effects
on the prosecution);  Vasquez v. Hillery, 474 U.S. 254, 260-264 (1986)
(racial discrimination in selection of grand jurors struck at
fundamental values of judicial system and society, and was not
susceptible to evaluation of resulting harm);  see generally Chapman,
386 U.S. 18, 23 & n.8 (1967).  Exceptions to the harmless error rule
are rare and must be based on extraordinary circumstances.  As this
Court recently stated, "if the defendant had counsel and was tried by
an impartial adjudicator, there is a strong presumption that any other
errors that may have occurred are subject to harmless error analysis"
(Rose v. Clark, 478 U.S. at 579 (emphasis added)).

   The conduct at issue here plainly falls within the general rule
requiring a harmless error evaluation.  There is simply no reason why
the alleged misconduct here -- procedural violations, primarily of
Fed. R. Crim. P. 6 -- should be given to preferred status over such
errors as improper comments on a defendant's silence, erroneous jury
instructions, violations of the Confrontation Clause, admission of
evidence in violation of the Fourth Amendment, misjoinder, or the
myriad other errors that this Court has held to be subject to harmless
error analysis (see note 6, supra).  The errors involved in this case
are in no way comparable to the limited class of errors that are not
subject to harmless error analysis, such as racial discrimination in
the selection of grand jurors or the complete denial of the right to
counsel at trial.  Rather, as the court of appeals recognized (Pet.
App. A16-A33), the conduct at issue in this case consisted of discrete
acts whose nature and potential impact were ascertainable from grand
jury transcripts and testimony at the hearings in the district court.
See, e.g., Mechanik, 475 U.S. at 78-79 (O'Connor, J., concurring in
judgment) (issue of whether simultaneous appearance of two witnesses
in the grand jury was harmless could be resolved by reviewing
pertinent grand jury transcripts).  /7/

   Finally, unlike conduct such as racial discrimination in the
selection of grand jurors, the conduct at issue in this case does not
"'strike( ) at the fundamental values of our judicial system and our
society as a whole'" (Vasquez, 474 U.S. at 262 (citation omitted)).
In Mechanik, the Court explicitly stated that the considerations
expressed in Vasquez "have little force outside the context of racial
discrimination in the composition of the grand jury" (475 U.S. at 71
n.1).  According to the Court (ibid.), "(n)o long line of precedent
requires the setting aside of a conviction based on a rule violation
in the antecedent grand jury proceedings, and the societal interest in
deterring this sort of error does not rise to the level of the
interest in deterring racial discrimination." In light of Mechanik, it
is apparent that petitioners cannot overcome the "strong presumption"
(Rose v. Clark, 478 U.S. at 579) that the alleged errors here are
subject to harmless error inquiry.  /8/

   Just as a lower court may not avoid the effect of a statute or
court rule by invoking the supervisory power, it may not avoid the
effect of this Court's precedents by the same device.  In United
States v. Payner, supra, the Court held that a judge may not suppress
evidence in a defendant's case based on an illegal search of a third
party, even when the judge bases his decision on his supervisory
authority.  In reaching its decision, the Court indicated that the
conclusion was compelled by its cases interpreting the Fourth
Amendment (447 U.S. at 731-732), and that "(t)he values assigned to
the competing interests do not change because a court has elected to
analyze the question under the supervisory power instead of the Fourth
Amendment" (id. at 736).  The logic of that rule is clear:  if a court
could dismiss an indictment or reverse a conviction for harmless error
merely by invoking its supervisory authority, this Court's numerous
harmless error decisions would be rendered meaningless.  Such a rule,
at bottom, would give lower courts "discretionary power to disregard"
decisions of this Court with which they do not agree (id. at 737).
Plainly, "the supervisory power does not extend so far" (ibid.);
accord, Hasting, 461 U.S. at 506-507.  /9/

   D. Dismissal Of An Indictment For Procedural Defects In The Grand
Jury Investigation That Do Not Affect The Grand Jury's Charging
Decision Would Be Unsound As A Matter Of Policy

   In addition to violating 28 U.S.C. 2111, Rule 52(a), the principles
of Costello, and this Court's decisions regarding harmless error, a
rule allowing the dismissal of an indictment in the absence of
prejudice would be unsound as a matter of policy.  An analysis of the
competing policy consideratios demonstrates that where the defendant
has not been prejudiced, the public interest is disserved by the
dismissal of an indictment.

   In Mechanik, this Court identified a number of costs associated
with the reversal of a criminal conviction:  (1) it forces jurors,
witnesses, courts, and the parties to expend further time, energy, and
other resources to repeat the trial;  (2) the loss of memory and
disappearance of witnesses may make retrial more difficult, if not
impossible;  and (3) even if a defendant is convicted on retrial, the
resulting delay undermines the goals of deterrence, rehabilitation,
and the prompt administration of justice.  475 U.S. at 72.  Contrary
to petitioners' contention (Kilpatrick Br. 26), those costs are not
avoided simply because a dismissal occurs before trial, particularly
when the grand jury investigation is a length and complex one, as was
the case here.  When an indictment is dismissed, the case must be
presented to a new grand jury.  And while some testimony from the
first proceeding can be read to (or summarized for) the second grand
jury, a prosecutor will often feel compelled, at least in a complex
case, to let the grand jury hear from some witnesses in person, so
that the grand jurors may ask questions and make credibility
determinations.  The presentation of the case to a new grand jury
consumes the time of prosecutors, witnesses, and grand jurors.  In
addition, it necessarily postpones the trial, thus delaying the
administration of justice and increasing the likelihood that witnesses
will disappear or that their memories will fade.  And if the defendant
is ultimately convicted, the goals of deterrence and rehabilitation
will be undermined by the delay.

   In addition, a rule sanctioning the dismissal of an indictment in
the absence of prejudice would almost certainly generate considerable
litigation, particularly in cases involving lengthy and complex
investigations.  The possibility of some imperfection in a grand jury
proceeding is not difficult to allege.  Litigation regarding such
allegations would entail a substantial expenditure of prosecutorial
and judicial resources and would impede the prompt adjudication of the
central question in the case -- the defendant's guilt or innocence.
See generally Costello v. United States, 350 U.S. at 363-364.
Moreover, the absence of a requirement of prejudice would eliminate a
defendant's need to explain how an alleged error was prejudicial.
Hearings would thus be required not only in cases involving a
likelihood of prejudice, but in many other cases as well.  Cf. R.
Traynor, The Riddle of Harmless Error 50 (1970) (footnote omitted)
("Reversal for error, regardless of its effect on the judgment,
encourages litigants to abuse the judicial process and bestirs the
public to ridicule it.").

   Petitioners and amici claim that dismissal in the absence of
prejudice is necessary to deter prosecutorial misconduct (see
Kilpatrick Br. 9;  Bank Br. 38;  ACLU Br. 18-23;  NACDL Br. 21-27).
However, remedies other than dismissal of the indictment are available
to ensure compliance with grand jury procedural requirements.  For
example, Fed. R. Crim. P. 6(e)(2) specifically states that "(a)
knowing violation of Rule 6 may be punished as a contempt to court."
See United States v. Dozier, 672 F.2d 531, 545 (5th Cir.), cert.
denied, 459 U.S. 943 (1982).  Other sanctions that a court has
available in cases of proved prosecutorial misconduct include
directing the prosecutor to show cause why he should not be
disciplined, requesting the Department of Justice to initiate
disciplinary proceedings against the prosecutor, /10/ reporting the
prosecutor's conduct to the disciplinary committee of the bar of which
he is a member, or chastising the prosecutor in a public judicial
opinion.  See generally Hasting, 461 U.S. at 506 n.5.  Because these
alternatives focus on the person responsible for the improper conduct
and do not impose unjustified costs on the criminal justice system,
they are plainly preferable to the remedy of dismissal.  See generally
United States v. Kelly, 543 F. Supp. 1303, 1314, supp. opinion, 550 F.
Supp. 901 (D. Mass. 1982).

   Where, as in this case, the errors did not affect the grand jury's
charging decision, dismissal of the indictment in the absence of
prejudice would be an exercise in futility.  If the errors in the
grand jury proceeding did not affect the first grand jury's charging
decision, it logically follows that, absent some unusual
circumstances, another grand jury will hand down an indictment as
well.  /11/ In such cases, the whole process of dismissal and
reindictment would accomplish very little except for delay.  /12/ In
contrast, where prejudice has occurred, dismissal is more likely to
have a meaningful effect on the disposition of the case, because of
the prospect that a new grand jury, not exposed to the error, will
refuse to indict.  Thus, a requirement of prejudice does not, as the
as the Bank of Nova Scotia alleges (Br. 36), render the rules
governing grand jury proceedings "dead letters," any more than the
harmless error rule makes "dead letters" of the rules of evidence and
procedure that are designed to ensure a fair trial.

   Finally, petitioners have not offered a workable test for
determining when a court should dismiss an indictment in the absence
of prejudice.  For example, would one deliberate error count for more
than a large number of negligent errors?  Would dismissal ever be
appropriate in the absence of bad motive?  Cf. Kilpatrick Br. 11
(noting that even unintentional misconduct threatens the grand jury's
integrity).  Should a court be less willing to dismiss an indictment
stemming from a length investigation?  Would dismissal ever be
appropriate when an error is not a recurrent one in a particular
jurisdiction?  Should constitutional errors weigh more heavily than
violations of rules of procedure?  Would the extent of the
prosecutor's prior experience in conducting grand jury investigations
be relevant?  In addition, questions would no doubt arise as to
whether dismissal in the absence of prejudice would be appropriate
during trial but before the jury has rendered its verdict.  These
difficult questions underscore the prospect of endless litigation --
and widely varying standards among jurisdictions -- if this Court were
to sanction dismissals of indictments in the absence of prejudice.

   II. DISMISSAL OF THE INDICTMENT WOULD BE INAPPROPRIATE IN THIS CASE
EVEN IF AN INDICTMENT MAY BE DISMISSED WITHOUT A SHOWING OF PREJUDICE

   A. Even if dismissal of an indictment in the absence of prejudice
were appropriate in some class of cases, dismissal would be
inappropriate in this case.

   The Second Circuit, which is the only circuit that has ever
dismissed an indictment in the absence of prejudice, has stated that
dismissal is appropriate only when "the course of official misconduct
is a demonstrated, long-standing one," i.e., when "the pattern of
misconduct is widespread or continuous.  United States v. Fields, 592
F.2d 638, 648 (2d Cir. 1978), cert. denied, 442 U.S. 917 (1979);
accord, e.g., United States v. Brown, 602 F.2d 1073, 1076-1077 (2d
Cir.), cert. denied, 444 U.S. 952 (1979).

   In the present case, there is no claim that the conduct at issue
has been widespread in the District of Colorado (or in any other
district).  The district judges never suggested that any of the
conduct that the court of appeals found to be improper had arisen
regularly in other cases or involved persons other than the
prosecutors who conducted the investigation in this case.  To the
contrary, Judge Winner went out of his way to point out that "I have
had my fair share of experience in dealing with Tax Division lawyers
for whose ability and ethics I have the highest regard" (Pet. App.
D10).  He expressed similar high regard for the United States
Attorney's Office in Denver (see id. at D1, D2).  And petitioners have
likewise made clear that they are not alleging any widespread abuse
extending beyond this case.  As Judge Winner noted (id. at D2),
"(d)efense counsel carefully point out that neither they nor their
clients complain about anything other than acts of the IRS and
Department of Justice Tax Division lawyers who ran the grand jury and
tried the (obstruction of justice) case." Thus, even under the
standard applied in the Second Circuit, dismissal would not be
appropriate here.

   A second possible standard for dismissing indictments in the
absence of prejudice is the one proposed by amici (NACDL Br. 26;  ACLU
Br. 15):  to dismiss if the error was more than an inadvertent or
isolated occurrence.  Even under that standard, which has not been
applied by any court of appeals, /13/ dismissal would not be required
here.  The record in this case reveals that the alleged errors were
isolated instances in a 20-month investigation that involved dozens of
witnesses and thousands of documents.  It would be unreasonable to
expect that no errors would be uncovered following such a lengthy
investigation, particularly when thousands of pages of grand jury
materials were made available to the defense for line-by-line
scrutiny.  /14/ See generally Van Arsdall, 475 U.S. at 681 (noting the
"virtually inevitable presence of immaterial error" in a criminal
trial and stating that a defendant is entitled "to a fair trial, not a
perfect one").  The record in the present case reveals that, on the
whole, the investigation was conducted fairly and professionally.  The
transcripts of the prosecutors' statements to the grand jury
throughout the 20-month investigation demonstrate that the prosecutors
undertook to ensure that any indictment returned would be the result
of a fair and independent grand jury investigation (see generally Pet.
App. A27-A28 n.20 (citing examples)).  For instance, the prosecutors
repeatedly admonished the grand jury that an indictment should not be
returned unless the grand jurors were convinced that the targets of
the investigation had willfully violated the law (J.A. 95-97, 165,
167-169, 176, 181).  On several occasions, the prosecutors stated that
they were advocates and that the grand jurors should evaluate their
remarks in that light (J.A. 116, 177, 191-192).  In addition, the
prosecutors explained that the grand jurors were the sole judges of
credibility (J.A. 171).  Those remarks of the prosecutors -- made
throughout the investigation -- belie the view that the prosecutors
were deliberately attempting to usurp the grand jury's independence.

   By the same token, the transcripts rebut the district court's
assertion (Pet. App. C54) that the grand jury "was converted into
little more than a rubber stamp." As the court of appeals noted,
"(t)he grand jury transcripts portray an active and questioning grand
jury," one that was "familar with the record," asked "thoughtful()"
questions, and "vigorously questioned the prosecutors" (Pet. App.
A27-A28 & n.20 (citing numerous examples)).

   In short, while we concede that the prosecutors committed certain
nonprejudicial errors, we submit that petitioners are wrong in
describing the record in this case as reflecting "(u)nprecedented,
deliberate and pervasive governmental misconduct" (Kilpatrick Br. 3).
Since the overall conduct of the prosecutors during the investigation
was proper, the extreme sanction of dismissal of the indictment would
be inappropriate.

   B. An analysis of the specific allegations of misconduct made by
petitioners further shows that petitioners have greatly exaggerated
the seriousness of the alleged misconduct and that dismissal would be
inappropriate here.  Petitioners cite nine purported violations
committed by the prosecutors in this case (see Bank Br. 8-25).  /15/
In several instances, the "errors" involve conduct that is entirely
lawful.  In others, there is no evidence to support the district
court's findings.  And in the remainder of the categories, the errors
constitute at most exercises of poor judgment on the part of the
prosecutors, rather than deliberate efforts to undermine the integrity
of the grand jury.

   1. Use of the term "agents of the grand jury"

   During the grand jury investigation, one of the prosecutors
administered an oath to certain IRS agents who appeared before the
grand jury and referred to them as "agents of the grand jury" (see,
e.g., J.A. 91).  The court of appeals did not decide whether the use
of that term was error;  rather, it held that petitioners had not
suffered any prejudice from its use (Pet. App. A26).  In our view, the
designation of the agents as "agents of the grand jury" was not error
at all.  In any event, it is surely not the kind of egregious
misconduct that would warrant dismissal of an indictment.

   The term "agents of the grand jury" was not created by the
prosecutors;  that term has been used by this Court and numerous other
courts.  /16/ In United States v. Jones, 766 F.2d 994, 1001, cert.
denied, 474 U.S. 1006 (1985), the Sixth Circuit specifically rejected
the view of the district court in this case and held that the swearing
of a government agent as an "agent of the grand jury" was not
prosecutorial misconduct and did not warrant dismissal of an
indictment.  The court stated that it was "not persuaded * * * that
use of the word 'agent' in connection with government personnel
assisting a grand jury will undermine the foundation of public trust
and confidence in the system" (ibid.).  See also United States v.
Stanford, 589 F.2d 285, 292 (7th Cir. 1978) (expressing approval of
the grand jury's taking "precautions to preserve secrecy * * * by
swearing the FBI personnel as agents and cautioning them about the
need for secrecy"), cert. denied, 440 U.S. 983 (1979).  /17/ The term
"agent of the grand jury" was a reasonable shorthand way to refer to
the agents' proper role in the investigation, in which they served as
"government personnel * * * deemed necessary by an attorney for the
government to assist an attorney for the government in the performance
of such attorney's duty to enforce federal criminal law." Rule
6(e)(3)(A)(ii);  see also Pet. App. A25-A26;  United States v. Sells
Engineering, Inc., 463 U.S. 418, 430 & n.13 (1983).

   The prosecutors did not attempt to mislead the grand jury by
referring to the IRS agents as "agents of the grand jury." In
particular, they did not urge the grand jurors to treat the agents as
somehow more reliable because they were serving as the grand jurors'
agents.  Indeed, it is significant that, on numerous occasions, the
prosecutor referred to the agents as "my agent(s)" (see, e.g., J.A.
96, 98, 99, 108, 110, 113, 114, 115, 117, 137, 153, 163, 165, 171,
176).  Similarly, contrary to the Bank of Nova Scotia's contention
(Br. 12), the record reveals that the grand jury understood that the
agents were aligned with the prosecutors and that their testimony
could not be accepted without assessment of their governmental bias.
For instance, during discussions with the prosecutors, grand jurors
referred to the agents as "your guys" or "your agents" (see J.A. 117,
157).  /18/ For these reasons, the use of the term "agent of the grand
jury," even if it was technically inaccurate, was not the type of
conduct that warrants dismissal in the absence of prejudice.

   2. Presentation of summaries of evidence

   The district court found that the government presented inaccurate
and misleading summaries of evidence to the grand jury (Pet. App.
C25-C31).  The court of appeals approved the use of summaries in
general, especially in complex cases (id. at A21).  The court,
however, found it unnecessary to decide whether the summaries were
accurate, since the court concluded that any error on that score
resulted in no prejudice to the defendants (id. at A28-A29).  At
bottom, the challenge to the accuracy of the summaries is
indistinguishable from the argument that unreliable or incompetent
evidence was presented to the grand jury, a claim that this Court has
held not to be a valid basis for dismissing an indictment.  See
Calandra, 414 U.S. at 344-345 (validity of an indictment "is not
affected by the character of the evidence considered");  Costello, 350
U.S. at 364 (defendants may not challenge indictments "on the ground
that they are not supported by adequate or competent evidence").

   Although the court of appeals did not expressly reject the district
court's findings as to the accuracy of the summaries, the court
rejected the argument that the Bank of Nova Scotia makes in this Court
-- that the government's handling of the summaries deprived the grand
jury of its ability to make an independent determination of probable
cause with respect to the Bank.  See Pet. App. A28-A29.  We submit
that the record supports that finding by the court of appeals, and
fails to support the district court's finding that the summaries were
inaccurate and were presented in a misleading fashion.

   The summaries in dispute relate primarily to testimony by IRS Agent
Richard Mendrop on September 29, 1982, the day before the indictment
was returned, regarding the evidence against the Bank of Nova Scotia.
The district court found that the government misled the grand jury
into believing that the summaries were based solely on prior testimony
before the grand jury rather than on other information obtained by
Mendrop during his investigation (Pet. App. C26).

   In fact, Mendrop never testified that he was just summarizing prior
testimony, and the prosecutor never said that he was.  The district
court's conclusion was based in large part on the following statement
by a prosecutor shortly before Mendrop appeared (J.A. 176):  "I will
put my agents up here to summarize, just walk through, one more time,
and refresh your memory." See also J.A. 161.  But the prosecutor, in
making that remark, did not state that Mendrop would be summarizing
only testimony previously heard by the grand jury.  And Mendrop
himself made it clear that he was discussing not only evidence
previously presented to the grand jury but also evidence he had
obtained in assisting the prosecutor in conducting the grand jury
investigation.  Thus, at the beginning of the testimony at issue,
Mendrop informed the grand jury that he had "analyzed the evidence
which (he had) gathered" and that he would "summarize the evidence"
for the grand jury (J.A. 181).  Later, in discussing information that
he had obtained, Mendrop referred to a "statement" (as opposed to
"testimony") from a particular person (J.A. 190).  Moreover, the grand
jury was well aware that some of the information it received during
the investigation was based on interviews conducted outside the grand
jury's presence (see, e.g., J.A. 113-115, 136-137, 155-156, 158-159;
see also J.A. 163-164).  And a grand jury can reasonably be expected
to know which witnesses have testified before it and to recall the
testimony of such witnesses.

   The district court found that Mendrop's summary was "an inaccurate
recitation of 'facts' in several significant respects" (Pet. App.
C28).  Specifically, Mendrop testified that Tom Waters -- a former
owner of another bank (to which petitioner Kilpatrick owed money) --
had stated that he had been introduced to Monte Smith, the manager of
the Bank of Nova Scotia's Cayman Islands branch, at Kilpatrick's
offices in Denver (J.A. 189-190).  The district court found (Pet. App.
C28) that this testimony was incorrect because Waters' description of
Smith at petitioner Kilpatrick's trial on the obstruction of justice
count of the indictment did not seem to fit Smith.

   In the first place, the question whether Smith visited Kilpatrick
in Denver was not essential to the government's proof of the Bank's
criminal conduct.  Other evidence pertaining to the Bank was presented
both during Mendrop's summary /19/ and during other parts of the
investigation.  /20/ In any event, there was no showing that the
prosecutors offered evidence that they knew to be false, even on the
narrow question of whether Smith had visited Kilpatric in Denver.
/21/ In short, petitioners have failed to show that there was any
misconduct concerning the summaries, let alone any conduct that was so
egregious as to warrant dismissal of the indictment.  /22/

   3. Mistreatment of an expert witness

   Both the district court (Pet. App. C33-C34) and the court of
appeals (id. at A27) criticized the treatment of Roland Hjorth, a tax
professor at the University of Washington Law School, by one of the
prosecutors.  /23/ As the court of appeals concluded, that incident
did not prejudice petitioners (id. at A27).  We submit that the
prosecutor's actions, while regrettable, do not warrant dismissal of
the indictment.

   The incident, which occurred during a lunch break while the grand
jury was not in session (W. Tr. 491-493), was at worst a debate
between two lawyers arising out of a disagreement as to legal
theories, in which the prosecutor may have expressed himself too
strongly in the heat of the moment (see W. Tr. 496-507 (testimony of
Hjorth)).  Indeed, in appearing before the grand jury after the
incident, Hjorth stated that he appreciated the prosecutor's
"prodding" him into thinking things through (G.J. Tr., Hjorth,
7/20/82, 4:05 p.m., at 6).  And Hjorth testified at the motions
hearing that his grand jury testimony was not affected by the
prosecutor's conduct (W. Tr. 481-482).  In fact, when the incident
occurred, Hjorth had already said all that he intended to say to the
grand jury, and he was asked only a few questions when he appeared
again before the grand jury later in the day (see W. Tr. 472-473,
491).  /24/ Finally, although two grand jurors may have heard the
conversation (see J.A. 61;  W. Tr. 377, 493), the prosecutors later
instructed the grand jury (on the day the indictment was returned) to
disregard anything they may have heard in conversations between a
prosecutor and a witness (J.A. 191).  /25/

   4. Granting informal immunity

   In dismissing the indictment, the district court stated that the
prosecutors "ignored entirely the federal immunity statute (18 U.S.C.
Sections 6001, et seq.) * * * and, instead, secured testimony by
engaging extensively in * * * bestowing 'informal immunity' through
'letters of assurance'" (Pet. App. C20).  According to the district
court, that practice was "not merely damnable * * *(but) clearly
illegal" (id. at C20 n.13).  In reaching that decision, the district
judge relied heavily on one of his own decisions, which was later
reversed by the Tenth Circuit, United States v. Anderson, 577 F. Supp.
223, 233 (D. Wyo. 1983) (Kane, J.), rev'd, 778 F.2d 602, 606 (10th
Cir. 1985).

   The court of appeals rejected the district court's holding that the
use of informal immunity was illegal (Pet. App. A22 (citing
authority)).  /26/ The court of appeals' ruling accords with the
ruling of every other circuit that has squarely faced the issue.  See
United States v. Winter, 663 F.2d 1120, 1133 (1st Cir. 1981) (citing
cases), cert. denied, 460 U.S. 1011 (1983);  United States v. Librach,
536 F.2d 1228, 1230 (8th Cir.), cert. denied, 429 U.S. 939 (1976);
cf. United States v. Murphy, 768 F.2d 1518, 1532 (7th Cir. 1985),
cert. denied, 475 U.S. 1012 (1986);  United States v. Gullett, 713
F.2d 1203, 1208 (6th Cir. 1983), cert. denied, 464 U.S. 1069 (1984).
/27/

   5. Calling witnesses who asserted their privilege against
compulsory self-incrimination

   The district court held (Pet. App. C23-C25) that the prosecutor
engaged in misconduct by bringing before the grand jury seven
witnesses who the prosecutors believed were likely to invoke the Fifth
Amendment.  That holding was erroneous, and it was properly rejected
by the Tenth Circuit (id. at A26-A27).

   The courts have held that even a target of an investigation may be
compelled to appear before a grand jury and, in effect, be tested in
front of the grand jurors.  See, e.g., United States v. Friedman, 445
F.2d 1076, 1088 (9th Cir.), cert. denied, 404 U.S. 958 (1971);  United
States v. Cefalu, 338 F.2d 582, 584 (7th Cir. 1964).  It follows, a
fortiori, that there is no bar to calling a third party, whose
assertion of the privilege would have little likelihood of prejudicing
the target.

   The rule is no different even when the prosecutor is informed (or
otherwise has reason to believe) that a witness intends to invoke the
Fifth Amendment.  Numerous courts have held that calling a witness
before the grand jury under such circumstances is not improper.  See,
e.g., United States v. Wolfson, 405 F.2d 779, 784-785 (2d Cir. 1968)
(collecting cases), cert. denied, 394 U.S. 946 (1969);  United States
v. DeSapio, 299 F. Supp. 436, 440 (S.D.N.Y. 1969);  United States v.
Zirpolo, 288 F. Supp. 993, 1007 (D.N.J. 1968);  United States v.
Leighton, 265 F. Supp. 27, 36-38 (S.D.N.Y. 1967).

   The logic of these cases is apparent.  Even if the prosecutors
expected that the witnesses would assert the Fifth Amendment, they
could not be certain of that until the witnesses actually appeared
under oath before the grand jury.  Witnesses not infrequently change
their strategies when they must actually appear before a grand jury.
Moreover, by calling the witnesses, the government was able to make a
complete record on the thoroughness of its investigation (see J.A.
65), an issue that sometimes arises at trial in tax prosecutions.  See
generally Holland v. United States, 348 U.S. 121, 135-136 (1954).

   If petitioners were correct that prosecutors may not call before
the grand jury witnesses who announce an intention to assert their
Fifth Amendment privilege, a witness "could automatically gain
immunity from Grand Jury subpoena" merely by advising the prosecutor
that he intends to invoke the Fifth Amendment;  in such a case the
witness "'would denude that ancient body of a substantial right of
inquiry'" (Leighton, 265 F. Supp. at 38 (citation omitted)).  /28/

   Finally, as the court of appeals pointed out (Pet. App. A26, A27),
the record reveals that the prosecutors ceased their questioning once
each witness invoked the Fifth Amendment (see J.A. 139-140, 141-142,
143, 150-151, 153-154, 154-155, 158).  And the prosecutors in no way
tried to build their case around these assertions of the Fifth
Amendment.  To the contrary, they took care to prevent prejudice to
the defendants by repeatedly advising the grand jurors that they
should not draw any adverse inferences from a witness's invocation of
the Fifth Amendment (see, e.g., J.A. 109, 130-131, 131-132, 155,
169-170).  That advice was given not only months prior to the time the
witnesses asserted the privilege, as acknowledged by the district
court (Pet. App. C25), but also virtually contemporaneously with the
testimony of two of the witnesses (see J.A. 153-155;  see also J.A.
169-170).  In short, there is nothing about the brief appearances of
the seven witnesses who invoked the Fifth Amendment that would warrant
dismissing the indictment.  See generally Namet v. United States, 373
U.S. 179, 186-189 (1963);  Baker v. United States, 389 F.2d 629,
630-633 (7th Cir.), cert. denied, 393 U.S. 875 (1968).

   6. Violations of Rule 6(d)

   We do not dispute that Fed. R. Crim. P. 6(d) was violated by the
simultaneous appearances before the grand jury of two IRS agents to
ready testimony given before the prior grand jury.  The violations,
however, were only technical ones.  The prosecutors did not have any
improper motive, and, as the court of appeals found (Pet. App. A18),
the joint appearances could not possibly have prejudiced the grand
jury.

   The joint reading of transcripts began when the agents complained
of colds and sore throats and asked the prosecutors whether they could
read together to break up the procedure (J.A. 52-53).  Previously,
only one agent had appeared at a time to read transcripts (see, e.g.,
J.A. 119).  The prosecutors agreed to permit two agents to read
transcripts at the same time (one reading the questions and the other
reading the answers) (J.A. 54).  Thus, the procedure was initiated for
an entirely innocent reason, even though it was technically
inconsistent with Rule 6(d).

   The two special agents who did most of the joint readings --
Mendrop and Raybin -- were familiar figures who had appeared before
the grand jury individually prior to their joint appearances (e.g.,
G.J. Tr., Mendrop, 8/4/81, 9:25 a.m.; G.J. Tr., Raybin, 9/9/81, 10:02
a.m.).  It is not disputed that the agents gave no testimony of their
own when they appeared together before the grand jury.  And according
to the agents' testimony in the hearing before Judge Kane (J.A. 66-67)
-- which was not contradicted by the transcripts of the grand jury
proceedings (see J.A. 53-54) -- no questions were asked during the
readings.  Indeed, the prosecutors took steps to make sure that
questioning would not occur.  Thus, as the district court noted (Pet.
App. C8), the grand jurors were advised not to ask questions when the
agents appeared to read transcripts.  Instead, they were instructed to
jot down any questions they had, so that the prosecutors could answer
them later (J.A. 137-138).  And the prosecutors instructed the agents
not to answer any questions (J.A. 53).  The prosecutors also advised
the grand jurors that if they were not satisfied with having
particular evidence introduced through the transcript, the witness
could be called in person (J.A. 138).

   The joint reading of transcripts was a purely ministerial function
that did not place the agents' credibility at issue.  Cf. United
States v. Blitz, 533 F.2d 1329, 1344 (2d Cir.), cert. denied, 429 U.S.
819 (1976).  Thus, the technical violation of Rule 6(d) in this case
did not implicate the concerns to which the rule is addressed -- i.e.,
to safeguard the secrecy of the grand jury proceedings and to protect
the grand jurors from the possibility of undue influence.  See
Mechanik, 475 U.S. at 74 (O'Connor, J., concurring in judgment).
Here, grand jury secrecy was not jeopardized;  the agents were persons
to whom disclosures of grand jury information could properly be made
under Rule 6(e)(3)(A)(ii).  And there was no danger of undue influence
or intimidation of the grand jurors.  Unlike in the case of in tandem
testimony, where there is a potential for undue influence because each
witness may corroborate the other's account and add to the other's
credibility, a risk of undue influence is not present when the joint
appearance of witnesses involves only the reading of transcripts.  And
there is nothing inherently intimidating about two agents reading
transcripts to the grand jury.  /29/ In short, the technical violation
of Rule 6(d) in this case does not even remotely warrant dismissal of
the indictment.

   7. Alleged use of grand jury to gather information for civil
purposes

   The district court found that the record "suggests that information
was disclosed to other IRS agents for use in civil cases" (Pet. App.
C9).  The district court also found that there was a "serious
possibility" that the grand jury was "manipulated in order to obtain
evidence useful in later civil litigation" (id. at C12).  The court of
appeals rejected those findings, noting the lack of record support for
them (id. at A23) and pointing out (id. at A25 (footnote omitted))
that the grand jury's return of "an extensive indictment is probative
evidence that it was not abused to obtain evidence for civil
purposes." /30/

   The court of appeals correctly rejected the district court's
findings.  The district court's determination that information may
have been disclosed for civil purposes is not only without evidentiary
support but is in conflict with prior findings made by the district
court itself.  Near the end of the hearing, Judge Kane stated (J.A.
89-90), "(A)s I recall the testimony of the I.R.S. special agents,
they have emphatically denied turning over grand jury material to the
civil branch and I haven't seen any evidence yet that says that that
indeed was done." No such evidence was offered at any time after Judge
Kane made that observation.

   Similarly, the district court's finding of manipulation is based
entirely on speculation.  In making that finding, the district court
cited the fact that the IRS had an interest in the evidence developed
(Pet. App. C12-C13), that several investors in the tax shelters were
interviewed by government agents but were not called before the grand
jury (id. at C13), and that the IRS civil personnel performed
calculations of the taxes due on some of the investors' tax returns
and that those calculations were not presented to the grand jury (id.
at C13-C14).  Those factors do not support the district court's
finding of possible manipulation.

   Most criminal tax cases involve alleged violations of provisions of
the tax laws that, in the absence of willfulness, would still
constitute civil violations.  Thus, the mere fact that the government
performed calculations of tax liability and gathered information that
may also have been relevant in a civil action is not enough to permit
an inference that the grand jury was manipulated.  That is especially
true in the present case.  As one of the special agents testified
(J.A. 29-30), the computations of tax liability had no civil purpose,
and those computations were not turned over to anyone at the IRS who
had a civil function.  And as the court of appeals noted (Pet. App.
A24), nothing in Fed. R. Crim. P. 6 prohibited the prosecution from
availing itself of the expertise of IRS civil personnel, who performed
the computations.  See Fed. R. Crim. P. 6(e)(3)(A)(ii);  United States
v. Sells Engineering, Inc., 463 U.S. 418, 428 (1983).  /31/

   Furthermore, the investor interviews were entirely proper as part
of a thorough investigation.  It is apparent that in a criminal
investigation involving a tax shelter, investors can be a source of
information on the harm caused to the government by the shelter.
Moreover, the interviews were relevant to possible mail fraud charges.
 At a trial for mail fraud, the testimony of investors as to their
reasons for investing in the tax shelters would be relevant to
establish the representations that were made to investors and to show
that those representations had the potential to defraud the investors.
 Indeed, during the hearings before the district court, an agent
explained the purpose of the investor interviews and indicated their
relationship to mail fraud (J.A. 26).  In addition, the grand jury
transcripts reveal that at least three investors appeared before the
grand jury (see G.J. Tr., Long, 12/9/81, 10:04 a.m., at 5-6;  G.J. Tr.
Henkel, 2/4/82, 12:52 p.m., at 6-7, 9;  G.J. Tr., Moffet, 3/2/82, 3:05
p.m., at 4-8).  /32/ Finally, the 27-count indictment itself confirms
that the interviews were conducted for a valid criminal purpose.  The
indictment names investors whom the defendants assisted in filing
false returns and to whom the defendants mailed items (Indictment 48,
55).  In short, the court of appeals properly rejected the district
court's finding that the grand jury had been manipulated for civil
purposes.  /33/

   8. Disclosure of the identity of targets of the investigation

   During the investigation, the government sent letters to potential
witnesses who had had business relationships with the targets of the
grand jury investigation, but who were beyond the reach of the grand
jury's subpoena power.  Those letters identified the targets and the
general nature of the investigation.  The letters indicated that "(i)t
has been determined that your testimony will be helpful in resolving
questions which still face the Grand Jury," and they invited the
recipients to appear before the grand jury.  Pet. App. C15-C16.  The
district court concluded (id. at C15-C17) that the government's
disclosure of the identities of targets of the investigation violated
Rule 6(e).  In our view, that ruling is erroneous and provides no
basis for dismissal of the indictment.

   The letters in question did not constitute improper disclosures of
"matters occurring before the grand jury" (Fed. R. Crim. P. 6(e)(2));
they revealed no more than would typically be revealed to a witness
during questioning when he appeared to meet with a prosecutor or to
testify before the grand jury.  Any blanket prohibition against
disclosing to potential witnesses the identity of the targets or the
general subject matter of an investigation would make it impossible
for the prosecutor to direct a witness's testimony to the matter under
investigation or for him to determine whether the witness had any
information that was of use to the grand jury.  Petitioners have cited
no authority -- and we know of none -- holding that the government, in
private letters to, or discussions with, potential witnesses, may not
reveal anything about the subject matter of a grand jury
investigation.  Thus, it was not unreasonable for the prosecutors to
believe that such disclosures were a permissible way of obtaining
information for the grand jury investigation.  /34/

   9. Imposition of secrecy obligations on two witnesses

   In two instances, a prosecutor instructed witnesses, contrary to
Fed. R. Crim. P. 6(e), that they should not reveal the fact that they
had testified before the grand jury or the contents of their testimony
(Pet. App. C18).  Both witnesses were attorneys who had previously
represented petitioners Kilpatrick and O'Donnell in administrative
proceedings involving the tax shelters (id. at C19).  The prosecutor
told the grand jury that they were calling the attorneys as witnesses
because "(t)he primary focus of our investigation involving the
financing is the factual representations made concerning Marlborough
Investments Limited, IFDC." The prosecutors explained that they wanted
"to know what the lawyers were told by the principals, and what
information they relayed to the parties" (ibid.).  Based on that
statement, the district court concluded that the secrecy obligations
were imposed for the strategic purpose of "prevent(ing) defendants
from determining the nature and extent of any such communication that
might have been revealed and to foreclose a challenge to such
testimony based upon an applicable privilege" (ibid.).  That
conclusion is groundless.

   During the hearing before Judge Kane, the prosecutor acknowledged
that he had made a mistake when he attempted to impose a secrecy
obligation on the witnesses, but that he had done so because of his
concern over grand jury leaks (J.A. 72-75).  /35/ The prosecutor also
testified that he had conducted only one grand jury investigation
prior to the instant investigation (J.A. 87).  He further testified
that, at the time he examined the two attorneys, while he was familiar
with Rule 6(e)(2), he was not focusing on the provision of that rule
that has been interpreted as prohibiting the imposition of secrecy
obligations on witnesses (J.A. 73, 77-78).

   Statements of the prosecutor before the grand jury show that the
prosecutor was seeking only unprivileged materials and information
from the targets' attorneys, as to which the privilege had already
been waived (J.A. 125-126, 128-129).  /36/ Neither the court nor
petitioners have cited anything in the grand jury testimony of the two
witnesses (or in any other part of the record) to indicate that the
prosecutor attempted to pressure either witness into violating the
attorney-client privilege.

   Finally, it does not appear that the prosecutors had anything to
gain by imposing the secrecy obligations.  If the two attorneys had
voluntarily disclosed privileged communications before the grand jury,
those communications could not have been suppressed at the grand jury
stage, even if petitioners had learned about the testimony immediately
after it occurred.  Cf. United States v. Calandra, supra;  Lawn v.
United States, supra;  United States v. Rogers, 751 F.2d 1074, 1079
(9th Cir. 1985).  More fundamentally, a secrecy obligation that takes
effect after a witness has testified in the grand jury could not have
the effect of inducing the witness to breach the attorney-client
privilege (or preventing the client from stopping such a breach).
/37/

                      * * * * *

   In sum, we submit that there is no legal or policy basis for
dismissing an indictment in the absence of prejudice.  But even if it
were proper in some circumstances for a court to do so, that drastic
step would not be appropriate here.  For the most part, the present
investigation was handled in a professional manner, and the record
reflects that the grand jury was independent and active.  Much of the
alleged misconduct found by the district court was entirely lawful.
The rest of the acts were isolated incidents limited to this case.
Thus, even if petitioners were not required to demonstrate prejudice,
the alleged errors, taken together, would not warrant the drastic
remedy of dismissal of the indictment in this 20-month investigation.

                              CONCLUSION

   The judgment of the court of appeals should be affirmed.

   Respectfully submitted.

   CHARLES FRIED

      Solicitor General

   WILLIAM S. ROSE, Jr.

      Assistant Attorney General

   WILLIAM C. BRYSON

      Deputy Solicitor General

   ROBERT H. KLONOFF

      Assistant to the Solicitor General

   GARY P. ALLEN

   ROBERT E. LINDSAY

   ALAN HECHTKOPF

      Attorneys

   MARCH 1988

   /1/ "Pet. App." refers to the appendix to the petition in No.
87-578;  "K. Tr." refers to the transcript of the hearing before Judge
Kane;  "W. Tr." refers to the transcript of the hearing before Judge
Winner.

   /2/ The court acknowledged the district court's finding that IRS
agents had convened grand jury sessions without government attorneys
being present, but it held that the finding on that issue was "not
supported by the record" (Pet. App. A23 n.14).

   /3/ Although Rule 52(a) is a court rule and has never formally been
enacted by Congress, it is clear that Congress intended for that rule
to govern harmless error questions and that the rule states
congressional policy regarding the principles of harmless error.  See
United States v. Lane, 474 U.S. 438, 454-455 (1986) (Brennan, J.,
concurring in part and dissenting in part).  Rule 52(a) was designed
to take the place of two statutory provisions, 18 U.S.C. (1946 ed.)
556 and 28 U.S.C. (1946 ed.) 391.  When Congress revised both the
Criminal Code and the Judicial Code several years later, it relied on
Rule 52(a) as the reason for repealing the two predecessor statutes so
as to avoid redundancy.  See H.R. Rep. 304 80th Cong., 1st Sess. 8
(1947) ("effect was given to the changes (made by the Federal Rules of
Criminal Procedure) by revising modified sections and repealing
superseded provisions");  H.R. Rep. 308, 80th Cong., 1st Sess. A236
(1947) (former Section 391 is "superseded by Rule 61 of said Civil
Rules, and Rule 52 of said Criminal Rules").  The following year,
Congress enacted 28 U.S.C. 2111 to ensure that the harmless error
provisions applicable to the district courts through the Civil and
Criminal Rules would be applicable to appellate courts as well.  See
H.R. Rep. 352, 81st Cong., 1st Sess. 18 (1949).

   /4/ Justice O'Connor's disagreement with the majority was over
whether the Rule 52(a) inquiry should focus on the petit jurors'
verdict or on the grand jury's charging decision.  In her view, the
focus should be on the grand jury's charging decision, regardless of
whether there has been a conviction (475 U.S. at 76).

   /5/ The dissenting judge below stated that this Court in Morrison
indicated that "a showing of prejudice is not required when the record
reveals 'a pattern of recurring violations'" (Pet. App. A40 (quoting
449 U.S. at 366 n.2)).  In fact, the Court left that issue open;  it
simply noted that "the record before us does not reveal a pattern of
recurring violations by investigative officers that might warrant the
imposition of a more extreme remedy in order to deter further
lawlessness" (ibid. (emphasis added)).  In any event, that language
strongly suggests that, if dismissal is ever warranted in the absence
of prejudice, there must be a history of misconduct, not simply
isolated violations in a single case.  As discussed on pages 26-27,
infra, under that standard, dismissal is inappropriate in the present
case.

   /6/ This Court has held numerous other errors to be subject to
harmless error analysis.  See, e.g., Pope v. Illinois, No. 85-1973
(May 4, 1987), slip op. 4-7 (erroneous jury instruction);  Rose v.
Clark, 478 U.S. 570 (1986) (same);  Delaware v. Van Arsdall, 475 U.S.
673, 681-684 (1986) (violation of Confrontation Clause);  United
States v. Lane, supra (misjoinder under Fed. R. Crim. P. 8(b));
Rushen v. Spain, 464 U.S. 114, 117-120 (1983) (right to be present at
trial);  Moore v. Illinois, 434 U.S. 220, 232 (1977) (admission of
identification obtained in violation of right to counsel);  Milton v.
Wainwright, 407 U.S. 371, 372-373 (1972) (admission of confession in
violation of the Sixth Amendment);  Chambers v. Maroney, 399 U.S. 42,
52-53 (1970) (admission of evidence obtained in violation of the
Fourth Amendment);  Coleman v. Alabama, 399 U.S. 1, 10-11 (1970)
(denial of right to counsel at a preliminary hearing);  Harrington v.
California, 395 U.S. 250, 254 (1969) (improper admission of statement
of nontestifying co-defendant);  Chapman v. California, 386 U.S. 18
(1967) (comments and instructions on a defendant's silence);  cf.
United States v. Bagley, 473 U.S. 677, 681-684 (1985) (opinion of
Blackmun, J.), and id. at 685 (White, J., concurring in part and
dissenting in part) (failure to disclose exculpatory material is
reversible error only if there is reasonable probability that the
material would have affected the outcome of the trial);  Strickland v.
Washington, 466 U.S. 668, 694 (1984) (to prevail on a claim of
ineffective assistance of counsel, a defendant must show reasonable
probability that, but for counsel's errors, the result of the
proceeding would have been different);  United States v.
Valenzuela-Bernal, 458 J.S. 858, 873-874 (1982) (showing of prejudice
required where the government deported potential witnesses before they
could testify for the defendant);  Weatherford v. Bursey, 429 U.S.
545, 554-557 (1977) (defendant's right to counsel not infringed where
attorney-client information obtained by government informant had no
effect on trial.

   /7/ Contrary to the ACLU's contention (ACLU Br. 3 n.2), this Court
in Mechanik did not leave open the question whether errors at the
grand jury stage that have not prejudiced the defendant may justify
dismissal of an indictment.  The Court's analysis in Mechanik is fully
consistent with the Court's many other decisions holding that a
defendant is not entitled to relief for nonprejudicial errors.  In
Mechanik, the Court rejected the proposition that a violation of Rule
6(d) requires automatic reversal of a subsequent conviction and
dismissal of an indictment in the absence of prejudice.  While the
dismissal in Mechanik was ordered after trial, both the majority and
concurring opinions suggested that, even in the pretrial setting, a
showing of prejudice is required before an indictment may be
dismissed.  Early in its opinion, the majority "assume(d) for the sake
of argument" that a violation of Rule 6(d) would have permitted the
district court to dismiss portions of the indictment "had there been
actual prejudice and had the matter been called to its attention
before the commencement of the trial" (475 U.S. at 69-70 (emphasis
added)).  At the end of its opinion, the Court stated that it was
"express(ing) no opinion as to what remedy may be appropriate for a
violation of Rule 6(d) that has affected the grand jury's charging
decision and is brought to the attention of the trial court before the
commencement of trial" (475 U.S. at 72 (emphasis added;  footnote
omitted)).  Thus, the question left open in Mechanik was not whether
dismissal would be appropriate prior to trial in the absence of
prejudice, but whether dismissal prior to trial is appropriate even
when there has been prejudice.  See also 475 U.S. at 75 (O'Connor, J.,
concurring in judgment) (recognizing that dismissal of an indictment
is a "drastic remedy" that, under Fed. R. Crim. P. 52(a), is
"appropriate only when a violation has impaired the substantial rights
of the accused").

   /8/ Petitioners devote considerable attention (Kilpatrick Br.
26-45) to their claim that the court of appeals erred in finding that
the alleged misconduct was not prejudicial.  According to petitioners
(ibid.), the errors in question were not harmless beyond a reasonable
doubt.  In the first place, however, that argument addresses the issue
on which this Court did not grant certiorari (Question 2), i.e.,
whether the court of appeals erred in holding that the errors were not
prejudicial.  In any event, petitioners' claim is without merit.  The
harmless beyond a reasonable doubt standard applies only to
constitutional errors.  The errors alleged in the present case, by
contrast, involve primarily procedural violations of Fed. R. Crim. P.
6(d) and (e).  See Lane, 474 U.S. at 446 n.9;  compare Chapman, 386
U.S. at 24, with Kotteakos v. United States, 328 U.S. 750, 765 (1946).

   /9/ The vast majority of the circuits that have addressed the issue
agree that an indictment may not be dismissed for procedural
irregularities in the grand jury (or other instances of governmental
misconduct) in the absence of prejudice.  See, e.g., United States v.
McKenzie, 678 F.2d 629, 631 (5th Cir.) (requiring a showing of
prejudice "even in the case of 'egregious prosecutorial misconduct'"
(citation omitted)), cert. denied, 459 U.S. 1038 (1982);  United
States v. Nathan, 816 F.2d 230, 234 (6th Cir. 1987);  United States v.
Griffith, 756 F.2d 1244, 1249 (6th Cir.), cert. denied, 474 U.S. 837
(1985);  United States v. Solomon, 679 F.2d 1246, 1250-1251 (8th Cir.
1982);  United States v. Crow Dog, 532 F.2d 1182, 1196-1197 (8th Cir.
1976), cert. denied, 430 U.S. 929 (1977);  United States v. Rogers,
751 F.2d 1074, 1077 (9th Cir. 1985);  United States v. Owen, 580 F.2d
365, 367-368 (9th Cir. 1978);  United States v. O'Keefe, 825 F.2d 314,
318 (11th Cir. 1987);  cf. United States v. Martino, 825 F.2d 754,
759-760 (3d Cir. 1987) (stating that, notwithstanding some of the
language in earlier cases, the Third Circuit has in fact "looked to
prejudice" in "every case").  Contra, United States v. Jacobs, 531
F.2d 87 (2d Cir.), vacated, 429 U.S. 909, on remand, 547 F.2d 772 (2d
Cir. 1976), cert. dismissed, 436 U.S. 31 (1978);  United States v.
Estepa, 471 F.2d 1132 (2d Cir. 1972).

   /10/ The Department of Justice has established proceudres for
investigating alleged misconduct by federal prosecutors.  Department
regulations establish penalties for the violation of rules governing
official conduct that range in severity from an official reprimand for
a single instance of minor misconduct to removal from office for
serious offenses or repeated acts of misconduct.  See U.S. Dep't of
Justice, DOJ Order 1752.1A, Discipline and Adverse Actions ch. 2 &
app. 1 (Apr. 27, 1981).  The Attorney General has established an
Office of Professional Responsibility (OPR) for the purpose of
investigating allegations of unethical conduct by Department attorneys
and other personnel.  See 28 C.F.R. 0.39a.  During 1985, the year
after the dismissal of the indictment in this case, OPR completed 278
investigations of complaints involving alleged misconduct by
Department of Justice employees.  See OPR, Ann. Rep. to Att'y Gen.
(1985), at 3-5;  see id. at 6-8 (discussing specific examples).

   /11/ As we have discussed (pages 9-12, supra), under the Costello
rule, an indictment may not be dismissed unless an error has so
profoundly tainted the grand jury process as to render the charging
document in effect something other than the "indictment of a Grand
Jury" (U.S. Const. Amend. V).  Under Costello, there may be
circumstances in which dismissal is not appropriate even where there
has been an effect on the grand jury's charging decision.  No such
issue is presented here, however, since the court of appeals viewed
this case as one in which the errors did not affect the grand jury's
decision to indict (see Pet. App. A18 & n.9, A22;  see also id. at A39
(dissenting opinion)).

   /12/ To be sure, the prospect of having to reindict a case -- an
inconvenient and often time-consuming task -- will provide some
deterrence when a prosecutor is otherwise deliberately inclined to
commit error.  Cf. Speedy Trial Act of 1974, 18 U.S.C. 3162(a)(2)
(authorizing dismissal of an indictment when a defendant is not
brought to trial within specified time limits).  Yet, a prosecutor who
deliberately engages in misconduct presumably has concluded that such
misconduct will benefit his case.  The threat of dismissal when the
defendant has been prejudiced would itself provide a deterrent in that
situation.  More fundamentally, we believe that the threat of
contempt, disciplinary action, or judicial disapproval in a published
decision provides a greater deterrent against prosecutorial misconduct
without imposing the substantial costs on the public described above.

   /13/ The test advocated by amici was proposed by the Third Circuit
in United States v. Serubo, 604 F.2d 807, 817 (1979).  The Third
Circuit, however, has never applied that test, as it has never
dismissed an indictment in the absence of a showing of prejudice.  See
United States v. Martino, 825 F.2d 754, 759-760 (1987).

   /14/ The Bank of Nova Scotia errs in asserting (Br. 4, 6-7 & n.6)
that the prosecutors deliberately tried to conceal misconduct by
suppressing certain grand jury transcripts.  While some proceedings
were apparently overlooked and not transcribed, there is nothing in
the record to indicate that the failure was intentional, and the
district court made no such finding (see Pet. App. C2-C3).

   /15/ For convenience, we will follow the Bank of Nova Scotia's
categories in discussing the various alleged errors.

   /16/ See, e.g., United States v. Mara, 410 U.S. 19, 20 (1973);  id.
at 24 (Douglas, J., dissenting);  In re Grand Jury Proceedings
(Mills), 686 F.2d 135, 136 (3d Cir.), cert. denied, 459 U.S. 1020
(1982);  In re Perlin, 589 F.2d 260, 262 (7th Cir. 1978);  see also
United States v. Cosby, 601 F.2d 754, 757-758 n.6 (5th Cir. 1979);  In
re Atterbury, 323 F.2d 726 (6th Cir. 1963);  but cf. United States v.
Claiborne, 765 F.2d 784, 794-796 (9th Cir. 1985), cert. denied, 475
U.S. 1120 (1986).

   /17/ Moreover, the prosecutor who administered the oath to the
agents testified at the hearing that in Atlanta, Georgia, where he had
had prior experience, government agents had been sworn and referred to
as agents of the grand jury (J.A. 45-46).  He also testified that he
was aware that the practice was followed in the Southern District of
Florida (J.A. 46).  The prosecutor admitted that he was not authorized
to administer an oath (J.A. 57;  Pet. App. C4).  The real issue,
however, is not that technical error but the propriety of the
designation "agents of the grand jury" and the role played by the
agents.

   /18/ Similarly, there is no evidence that the agents attempted to
make use of their designation in performing their duties.  The agents
testified at the hearing that, to their recollection, they never used
the term "agent of the grand jury" when interviewing witnesses (J.A.
29, 31, 35).  On a related point, the district court was plainly wrong
in finding (Pet. App. C8) that the agents convened grand jury
sessions.  The court of appeals, in rejecting that finding, stated
that it was "unable to find an instance in the record (where) the IRS
agents convened the grand jury sessions without Government attorneys
being present" (id. at A23 n.14).

   /19/ For instance, Mendrop noted that the Bank permitted Kilpatrick
to close a certain account and remove the funds even though Kilpatrick
did not have signature authority (G.J. Tr., Mendrop, 9/29/82, 9:32
a.m., at 68-69);  that the Bank had knowledge of Kilpatrick's various
business entities involved in the tax shelters (id. at 70-71);  that,
in transactions involving purported financing of the tax shelter
scheme, the Bank stopped payment on a check and backdated another
check (involving about $18 million) under suspicious circumstances
(id. at 65-66;  see Indictment 17);  and that the Bank received a
legal bill for work performed in examining a tax shelter that the
Kilpatrick organization had put together (but did not sell) (J.A.
188).

   /20/ For instance, testimony of various witnesses demonstrated that
the Bank was knowingly involved in a check kiting scheme that was part
of the fraud under investigation (J.A. 101-108, 117-119).  In
addition, exhibits before the grand jury included records of the Bank
relating to fraudulent tax shelter transactions (see, e.g., J.A.
172-173).  The exhibits showed that the Bank had received a prospectus
regarding an investment entity put together by the Kilpatrick
organization, and that the Bank therefore had reason to know that
Kilpatrick was in the tax shelter business (see Gov't C.A. Br. 29).
There was also testimony (J.A. 174-175) relating to the Bank's
suspicious backdating and substitution of a check.

   /21/ As recounted by Mendrop, Smith's visit was described not only
by Waters, but also by Kilpatrick's chauffeur (See J.A. 189).  The
district court noted that the government had doubts about the accuracy
of Waters' statement regarding Smith (Pet. App. C28).  In the
testimony cited by the district court, however, the prosecutor was
referring to doubts that arose several months prior to the indictment;
 he testified that steps were subsequently taken to resolve those
doubts (J.A. 88).  In any event, doubts by the government would not
necessarily mean that Waters' statement was wrong.  And there is no
requirement that a prosecutor inform a grand jury any time he is not
absolutely certain that a particular piece of evidence is reliable.

   /22/ Similarly, the district court erred in determining (Pet. App.
C30-C31) that a prosecutor mischaracterized the evidence against the
Bank when he stated, shortly before Mendrop's summary (J.A. 178-179):
"'(A)s my agents will tell you there is evidence that the bank knew it
was the IRS -- they were in fact told that it was the IRS they were
defrauding.'" The evidence (see, e.g., notes 19 and 20, supra)
provided a reasonable inference that the Bank knew that the IRS was
being defrauded, even if it was not "told" that explicitly.  Cf.
United States v. Nealy, 729 F.2d 961, 962-963 (4th Cir. 1984).  In any
event, the prosecutors repeatedly stated during the investigation that
they were advocates and that the grand jury should scrutinize their
statements as such (see J.A. 116, 177, 191-192).

   /23/ Hjorth testified as an expert witness at the request of a
target (see Pet. App. D15).  The prosecutors called Hjorth to discuss
tax law even though they were under no legal duty to do so.  Although
the law is not entirely settled, several circuits have held that a
prosecutor has no duty to present exculpatory evidence to the grand
jury.  See, e.g., United States v. Mitchell, 777 F.2d 248, 263 (5th
Cir. 1985), cert. denied, 476 U.S. 1184 (1986) United States v.
Hawkins, 765 F.2d 1482, 1488 (11th Cir. 1985), cert. denied, 474 U.S.
1103 (1986);  United States v. Sears, Roebuck & Co., 719 F.2d 1386,
1394 (9th Cir. 1983), cert. denied, 465 U.S. 1079 (1984).  Subsequent
to the indictment, the Tenth Circuit held, contrary to several
circuits, that a prosecutor is required to present "substantial"
exculpatory evidence to the grand jury.  See United Staes v. Page, 808
F.2d 723, 727-728 (1987) (collecting conflicting authorities), cert.
denied, No. 86-6848 (June 8, 1987).  It is doubtful that the
prosecutors would have been required to present Hjorth's legal theory
to the grand jurors, much less call Hjorth as a witness, even under
the standard later adopted by the Tenth Circuit.  Cf. United States v.
Sells Engineering, Inc., 463 U.S. 418, 430 (1983) (noting that the
prosecutor "advises the (grand) jury on the applicable law").

   /24/ Contrary to Judge Winner's suggestion, which Judge Kane
apparently adopted (see Pet. App. C34), Hjorth did not testify that
the prosecutor "'impl(ied) that the Tax Division of the Department of
Justice will take after the witness and will complain to the
University of Washington." Hjorth testified that during the
conversation at issue, the prosecutor stated, "I'll see you in court"
(W. Tr. 520).  The prosecutor acknowledged that he had made such a
statement, but he testified that he did not mean it as a threat to
prosecute the witness (J.A. 50).  The prosecutor described the
statement as "a rather flippant expression meaning * * * I don't think
you can support that position anyway, anywhere" (J.A. 63).  Hjorth
conceded at one point during the hearing that he was not intimidated
by the statement and that, in the context of two lawyers debating a
legal point, the statement could be characterized as, "I sure as heck
don't agree with that and I'll have a judge test this one if you want
to keep that concept alive" (W. Tr. 503-504).  Hjorth also testified
that the prosecutor had called him a discredit to his profession as a
law professor for testifying on behalf of one of the targets (W. Tr.
377-378, 496-497).  The prosecutor denied making such a statement
(J.A. 60), and Hjorth was unable to recall when in the sequence of
events the statement was allegedly made (W. Tr. 504-507).

   /25/ As this Court has indicated with respect to petit jurors,
there is an "almost invariable assumption of the law that jurors
follow their instructions." Richardson v. Marsh, No. 85-1433 (Apr. 21,
1987), slip op. 6;  accord, e.g., Greer v. Miller, No. 85-2064 (June
26, 1987), slip op. 9 n.8;  see also United States v. Drake, 494 F.2d
648, 650 (7th Cir. 1974) (possibility that petit jurors may have
overheard a witness tell the prosecutor that the defendant's alibi
witness was "lying" not reversible error, since there was no direct
evidence that any jurors actually heard the remark and the trial court
gave a general curative instruction).

   /26/ As the court of appeals' treatment of this issue illustrates
(see also pages 39-41, 43-46, infra), the Bank of Nova Scotia is
profoundly wrong in repeatedly asserting that the Tenth Circuit did
"not disput(e) the impropriety of the (prosecutors') conduct" (Br. 27)
and that "(t)he misconduct findings of Judge Kane were not disturbed
by the majority of the panel of the Court of Appeals" (id. at 7);  see
also id. at 4, 26, 32;  but see Kilpatrick Br. 40).

   /27/ The Bank of Nova Scotia attempts to argue that the manner in
which informal immunity was used prejudiced petitioners (Br. 17-18),
but its argument is in essence just a quarrel with the practice of
providing promises of immunity to prospective witnesses in exchange
for their cooperation and truthful testimony.  The court of appeals
found (Pet. App. A22) that the defendants suffered no prejudice based
on the use of informal immunity.

   /28/ Contrary to the district court's conclusion (Pet. App.
C46-C47), there is nothing improper in the fact that four of the
witnesses were asked questions concerning payment of their attorneys'
fees (see J.A. 139-140, 141-142, 143, 149-150).  The grand jury was
entitled to know whether one of the targets was paying the attorneys'
fees for witnesses who were refusing to testify before the grand jury.
 Payment of such fees, for example, could constitute an act in
furtherance of a conspiracy.  See generally In re Grand Jury
Proceedings (Pavlick), 680 F.2d 1026, 1028 (5th Cir. (1982).  In
addition, "any conduct, the likely effect of which would be to mislead
or conceal," is evidence of willfulness in a criminal tax prosecution.
 Spies v. United States, 317 U.S. 492, 499 (1943).  An attempt by a
target to induce witnesses to withhold information from the grand jury
would constitute such conduct and would therefore be evidence of
intent and guilty knowledge.  See generally Ewing v. United States,
386 F.2d 10, 15 (9th Cir. 1967) (attempt to bribe a witness), cert.
denied, 390 U.S. 991 (1968).  Furthermore, a corrupt endeavor to cause
a witness to assert the Fifth Amendment constitutes obstruction of
justice.  See, e.g., United States v. Arnold, 773 F.2d 823, 824 (7th
Cir. 1985);  United States v. Baker, 611 F.2d 964 (4th Cir. 1979).

   /29/ Indeed, multiple government personnel routinely appear before
grand juries.  For example, Rule 6(d) provides that government
"(a)ttorneys" (emphasis added) may be present in the grand jury, along
with "the witness under examination" (who may himself be a government
agent).  Thus, the presence of more than one government official in
the grand jury is not deemed by Rule 6(d) to be coercive per se.

   /30/ The Bank of Nova Scotia misstates the court of appeals'
holding in noting that the court "held that the return of an
indictment demonstrates that the grand jury was not abused for solely
civil purposes" (Bank Br. 21 n.19 (emphasis in original)).  The
italicized language is not part of the court's holding.

   /31/ According to the district court (Pet. App. C38), the
government acted "in direct contravention" of this Court's decisions
in United States v. Sells Engineering, supra (holding that Justice
Department Civil Division attorneys may not obtain grand jury
materials for use in civil actions without a court order), and United
States v. Baggot, 463 U.S. 476 (1983) (holding that an IRS civil tax
audit is not "preliminarily to or in connection with a judicial
proceeding" for purposes of Rule 6(e)(3)(C)(i).  The district court's
conclusion is factually incorrect, as we have shown.  Moreover, it
should be noted that Sells Engineering and Baggot were not decided
until after the indictment in the present case was returned.  And the
law was anything but clear prior to those decisions, as Chief Justice
Burger's dissenting opinions in those cases demonstrate.

   /32/ There is, of course, no requirement that every person
interviewed by government attorneys or agents be presented to the
grand jury.  Cf. United States v. Chanen, 549 F.2d 1306, 1312 (9th
Cir.) (noting that "the grand jury generally relies on the prosecutor
to determine what witnesses to call" and that the prosecutor
"determines what evidence to present before the grand jury"), cert.
denied, 434 U.S. 825 (1977).  The fact that various investors were
interviewed but did not testify before the grand jury does not show
that the investors were interviewed for an improper purpose.

   /33/ There is likewise no merit in the district court's finding
(Pet. App. C9) that the prosecutors relinquished to the IRS their
responsibility to determine the persons to whom disclosures of grand
jury material would be made.  As the court of appeals concluded (id.
at A23), the district court's finding is unsupported by the record.

   /34/ Also failing to support dismissal of the indictment is the
district court's finding (Pet. App. C9-C12) that disclosure lists
required by Rule 6(e) were inaccurate and were not filed promptly.
The district court noted, without any citation to the record, that
numerous IRS personnel given access to grand jury material were never
identified on the lists and "remain unknown even now" (Pet. App. C9).
The district court also found (id. at C11) that persons involved in a
project to prepare a computerized index of grand jury materials were
"apparently" omitted from the lists.  However, the record does not
show that any IRS employee was omitted from the disclosure list.
Moreover, an agent had an imprecise recollection at the hearing that
three people on the disclosure list were key punch operators involved
in the computer project (K. Tr. 76).  And we know of no evidence that
any key punch operators were actually omitted.  As for the promptness
of the preparation of the disclosure lists, it is true that the
government prepared a "catch-all" disclosure list at the end of the
investigation (see Pet. App. A24).  But in a 20-month investigation,
it was inevitable that some personnel would not have been listed
previously.  There is no evidence that the prosecutors and agents
deliberately delayed the addition of names to the disclosure lists for
some improper purpose.  On the contrary, an agent testified (J.A. 19)
that the U.S. Attorney's Office, which handled the preparation of the
lists, was requested to add names to the lists "at or about the time
that people were to be involved." Significantly, Judge Winner stated,
"I have no fault to find with the paper trail left in this matter
insofar as the disclosure requirements are concerned" (Pet. App. D25).

   /35/ Earlier, there had been allegations by Kilpatrick's attorney
that someone had approached Kilpatrick and attempted to sell him grand
jury information (J.A. 73, 75).

   /36/ The fact that the prosecutor expressed interest in
communications between the attorney witnesses and their clients does
not by itself indicate that he was seeking privileged information,
since not every communication between a lawyer and his client is
privileged.  See, e.g., United States v. Jones, 696 F.2d 1069,
1072-1073 (4th Cir. 1982);  In re Sealed Case, 676 F.2d 793, 808-809
(D.C. Cir. 1982);  United States v. Bump, 60 F.2d 548, 550-551 (10th
Cir. 1979);  B. Gershman, Prosecutorial Misconduct Section 2.4(d), at
2-22 to 2-23 (1987);  cf. United States v. Wolfson, 558 F.2d 59, 66
(2d Cir. 1977) (noting that the "ordinary presumption (is) that a
lawyer is competent to protect his client's confidential interests
before the grand jury").

   /37/ In addition to the nine grounds discussed above, petitioners
cite additional alleged misconduct that warrants only brief response.
First, they claim (Bank Br. 29;  Kilpatrick Br. 41) that one of the
prosecutors violated this Court's decision in Massiah v. United
States, 377 U.S. 201 (1964), by interviewing employees of the Bank of
Nova Scotia, without counsel for the Bank being present, after the
issuance of the indictment.  As the court of appeals (Pet. App. A22)
and Judge Kane (id. at C49) recognized, that incident obviously could
not have affected the grand jury's charging decision, since it
occurred after the indictment was returned.  Moreover, the prosecutor
involved, who was not one of the prosecutors who conducted the grand
jury investigation, had only a limited role in the case prior to the
return of the indictment (J.A. 36;  K. Tr. 1095-1096).  In any event,
the conduct does not appear to have been improper.  Since a
corporation is a distinct entity from its stockholders, officers, and
employees, the prosecutor could reasonably conclude that there was no
Sixth Amendment principle that barred him from interviewing an
unindicted employee of the Bank without first contacting the Bank's
counsel.

   In addition, the Bank of Nova Scotia refers to a statement
purportedly made by a prosecutor that even if the target was not
guilty, the government would "break" him with the cost of the defense
(Bank Br. 3).  The prosecutor strongly denied making that statement
(Pet. App. C14), and both Judge Kane and Judge Winner declined to
resolve the question whether the witness who attributed the statement
to the prosecutor was telling the truth (see Pet. App. C14, D14-D15).

   APPENDIX