Federal Deposit Insurance Corporation v. Sovereign State Capital, Inc., and C. Arnholt Smith

Smith appeals from an order holding him in civil contempt for refusing, on Fifth Amendment grounds, to answer a series of questions propounded to him in the course of supplementary proceedings conducted by his judgment creditor, appellee Federal Deposit Insurance Corporation (“FDIC”). Because we conclude that Smith was exonerated from answering by his proper assertion of the Fifth Amendment privilege, we vacate the contempt order and remand the case to the district court.

In April 1975, FDIC filed its complaint against C. Arnholt Smith and Sovereign State Capital, Inc. for fraud, money had and received, and violations of 18 U.S.C. §§ 656 , 1005, and 1014. The action arose out of the collapse of the United States National Bank in San Diego and, with it, the crumbling of Smith’s financial empire built upon fraudulent dealings and elaborate corporate machinations in which Smith was involved. FDIC, as receiver for United States National Bank, sought damages from Smith based on averments that Smith, as President and Chairman of the Board of United States National Bank, fraudulently and improperly approved loans to corporations that he controlled, the proceeds of which reposed with…