Discovery, Scope Of

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7203: Willful Failure to File Return, Supply Information, or Pay Tax: Trial: Discovery, Scope of

 

[79-2 USTC ¶9482] United States of America , Appellee v. Lester Genser and Lawrence Forman, Appellants

(CA-3), U. S. Court of Appeals, 3rd Circuit, Nos. 76-2623, 76-2624, 602 F2d 69, 7/16/79, Affirming unreported District Court decision

[Code Sec. 7602]

Summons: Delay of enforcement: Civil purpose.--The Court of Appeals affirmed a District Court finding that summonses issued by the IRS served civil purposes and were not issued to aid in criminal prosecution of a tax fraud case against the taxpayers. The fact that the IRS may have made a commitment to recommend the case for criminal prosecution did not by itself indicate that the summonses issued had no civil purpose.

Rob ert J. Del Tufo, United States Attorney, Maryanne T. Desmond, Assistant United States Attorney, Newark, New Jersey 07101, for appellee. Irving R. Segal, James D. Fornari, Susan K. Herschel, Schnader, Harrison, Segal & Lewis, 1719 Packard Building, Philadelphia, Pennsylvania 19102, for appellants.

Before SEITZ, Chief Judge, GIBBONS and HUNTER, Circuit Judges.

Opinion of the Court

PER CURIAM.

Appellants are now before this Court for the third time, challenging their convictions for income tax evasion. We initially remanded this case to the district court for an evidentiary hearing exploring their contention that summonses had been issued by the IRS, pursuant to 26 U. S. C. §7602, "solely for a criminal purpose," and thus were invalid under United States v. LaSalle National Bank [78-2 USTC ¶9501], 437 U. S. 298 (1978). United States v. Genser [78-2 USTC ¶9682], 582 F. 2d 292 (3d Cir. 1978). Following that hearing the district court found by a preponderance of the evidence that all of the summonses that had been issued were valid because the IRS had been interested, throughout the course of its investigation, in pursuing civil tax liabilities owed by the appellants.

We determined that it was necessary to retain jurisdiction over this appeal and remand the case for further findings because the district court had "failed . . . to confront defendants' claim that the IRS, as an institution, had committed itself before December 12, 1975, to refer the case for prosecution and that summonses issued after that commitment served no civil purpose." United States v. Genser [79-1 USTC ¶9275], 595 F. 2d 146, 151 (3d Cir. 1979). We deemed the district court's finding that the IRS had maintained a continuing civil interest in the outcome of the investigation an inadequate response to the appellants' contention because of our belief that LaSalle mandates that a court focus on the purpose of each individual summons. Noting that some of the summonses in this case had been issued after Frank Parisi, the IRS agent conducting the investigation, had substantially completed his work, and that "[i]nordinate and unexplained delays in the investigatory process are one factor that might lead a court to infer that an agent was acting at the behest of his superiors solely to pursue criminal aspects of the investigation," id. at 152, we remanded this case to the district court for additional findings.

After conducting an evidentiary hearing, at which Agent Parisi testified and was subjected to cross-examination, the district court entered its findings of fact. The court found, "by a preponderance of the evidence and more that each one of the questioned summonses in this case was issue[d] for a civil purpose," that there had been no "inordinate" or "extraordinary" delay in the IRS's investigation, and that two summonses that appellants introduced into evidence and about which Agent Parisi was questioned, had been "useful and indeed indispensable in computing the civil tax owed by the defendants." The court explicitly refused, however, to make a finding requested by the government that "no summons was issued after the IRS formed an institutional commitment to recommend prosecution." To the contrary, the court noted its belief "that from the first moment a representative of the Internal Revenue Service knows that a taxpayer has committed $10,000,000 worth [of tax evasion], they have a pretty good commitment to prosecute."

The appellants rely on the latter statement as support for the contention they now raise. Their present position is that, given an obvious institutional commitment on the part of the IRS to eventually recommend this case to the Justice Department for prosecution, the district court abused its discretion, and ignored the dictates of this court's opinion and that of the Supreme Court in LaSalle, by failing to hold a "meaningful" evidentiary hearing. Appellants contend that the hearing they were afforded on remand was less than meaningful because they were unable to cross-examine Parisi about contacts he had with Justice Department officials and his IRS superiors during his investigation and because they were denied production of a rough draft of Parisi's final report, of all summonses issued by Parisi after his initial contact with the Justice Department, and of the evidence obtained from those summonses.

The district court's statement about the Services institutional commitment, standing alone, offers no support to the appellants' contention. It is not just an institutional commitment to recommend prosecution that renders a summons issued under §7602 invalid; rather, it is the absence of a civil purpose for the summons that triggers the LaSalle rule. As the Supreme Court there stated: "We shall not countenance delay in submitting a recommendation to the Justice Department when there is an institutional commitment to make the referral and the Service merely would like to gather additional evidence for the prosecution." 437 U. S. at 316-17 (emphasis supplied). Likewise, in remanding this case to the district court, we noted: "The district court failed, however, to confront defendants' claim that the IRS, as an institution, had committed itself before December 12, 1975 , to refer the case for prosecution and that summonses issued after that commitment served no civil purpose." 595 F. 2d at 151 (emphasis supplied).

The burden placed on criminal defendants in appellants' position is a heavy one. They "bear the burden to disprove the actual existence of a valid civil tax determination or collection purpose by the Service." LaSalle, supra at 316. During the course of most investigations where significant amounts of civil liability are involved the IRS agents conducting and reviewing the inquiry will recognize that a recommendation for criminal prosecution might eventually be forthcoming. Nevertheless, a valid summons still may be issued under §7602 so long as the IRS uses that summons to pursue civil penalties and interest. As the Court stated in LaSalle: "For a fraud investigation to be solely criminal in nature would require an extraordinary departure from the normally inseparable goals of examining whether the basis exists for criminal charges and for the assessment of civil penalties." Id. at 314.

In our earlier opinion we recognized several indicators that could lead a reviewing court to infer that a given case may present such an "extraordinary departure" from those "normally inseparable goals." Where such indicators are present we stated that it may be necessary for the district court to scrutinize each suspect summons in order to satisfy itself of the existence of the requisite link between that summons and the IRS's proferred civil purpose. 595 F. 2d at 151.

One such indicator, of course, would be evidence that the Justice Department influenced the conduct of an IRS investigation, and the appellants here contend that their inquiries into Agent Parisi's contacts with Justice Department officials were unduly limited by the district court. We have already affirmed a finding by the district court, however, that "specifically rejected defendants' contention that Agent Parisi was influenced in his investigation by the Department of Justice." Id. Thus the district court did not err in limiting the appellants' inquiry into this area after remand.

We identified the issuance of a summons after the date of an IRS agent's recommendation that a case be referred to the Justice Department for prosecution as a second indicator that might lead a court to infer that the summons was not designed to advance a legitimate civil purpose. Id. One such summons was issued in this case following the filing of Agent Parisi's final report recommending prosecution. The defendants have been given access to that summons, however, and the district court has satisfied itself that the evidence obtained from that summons advanced a civil purpose.

Recognizing the possibility that an IRS investigating agent might delay his formal recommendation that a case be referred for prosecution, and that summonses might be issued during that period of delay solely for a criminal purpose, we noted that summonses issued during periods of "inordinate and unexplained" delay in the investigation would also merit special attention. Id. at 152. Because Agent Parisi did not file his final report in this case until five months after his investigation was substantially completed, we asked the district court to focus its inquiry on the causes of that delay. Based on its evaluation of Parisi's testimony and the record developed earlier in this case, the district court found that there were no delays of any kind during the course of the IRS's investigation. The court stated:

Indeed, I find, given what we usually see in these courts by way of processing of IRS civil investigations or criminal investigations, or civil and criminal investigations, there not only was no inordinate delay but by those terms the investigation proceeded very rapidly indeed.

Having so found, the district court was not obligated by the terms of our prior opinion to examine each summons, or the evidence derived therefrom, that was issued during the period between the substantial completion of Agent Parisi's investigation and the filing of his final report. Moreover, we conclude that the district court did not abuse its discretion in limiting appellants' cross-examination of Parisi, or in failing to grant appellants' request that Parisi's draft report, the 96 summonses issued after November, 1974, and the evidence derived therefrom, be produced.

We conclude that the district court's findings, based on Parisi's sworn testimony, that there were no inordinate or unexplained delays in the IRS's investigation and that each of the questioned summonses served a civil purpose, are not clearly erroneous. The appellants' request that this matter again be remanded to the district court for yet another evidentiary hearing will be denied.

We have previously determined that the other grounds raised by appellants in support of their contention that their convictions must be reversed are without merit. See United States v. Genser, 582 F. 2d at 296-99. We now conclude that, with respect to each of the summonses issued during the IRS's investigation of this case, the appellants have failed to meet their heavy burden of "disprov[ing] the actual existence of a valid civil tax determination or collection purpose by the Service." LaSalle, supra at 316. The judgments of the district court will be affirmed.

 

 

[79-1 USTC ¶9275] United States of America , Appellee v. Lester Genser and Lawrence Forman, Appellants

(CA-3), U. S. Court of Appeals, 3rd Circuit, Nos. 76-2623, 76-2624, 595 F2d 146, 3/9/79, Rem'g unreported District Court decision

[Code Sec. 7602]

Summons: Enforcement: Proper purpose: Discovery.--The court remanded a summons enforcement case to the lower court for a finding on the defendants' contention that some summonses had been issued after the IRS, as an institution, had committed itself to refer the case to the Justice Department for criminal prosecution. The decision of the U. S. Supreme Court in LaSalle National Bank, 78-2 USTC ¶9501, does not require a taxpayer to prove beyond all doubt that the IRS had completely ceased its civil investigation. Moreover, the lower court should have allowed the defendants to discover data relating to contacts between the IRS and the Justice Department and other data relating to the investigation.

One dissent.

Rob ert J. Del Tufo, United States Attorney, Maryanne T. Desmond, Assistant United States Attorney, Newark, N. J. 07101 for appellee. Irving R. Segal, James D. Fornari, Susan K. Herschel, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa. 19102, Zuckerman & Aronson, 60 Park Place, Newark, N. J. 07012, for appellants.

Before SEITZ, Chief Judge, BIGGS and HUNTER, Circuit Judges.

Opinion of the Court

SEITZ, Chief Judge:

In this aspect of these appeals we must examine the substantive and procedural implications of the Supreme Court's decision in United States v. LaSalle National Bank [78-2 USTC ¶9501], -- U. S. --, 98 S. Ct. 2357 (1978), which described the limits of the Internal Revenue Service's authority to issue civil summonses under 26 U. S. C. §7602. Defendants Lester Genser and Lawrence Forman appealed from their convictions for tax evasion. In an earlier opinion we rejected various challenges to those convictions but retained jurisdiction and remanded the case to the district court for an evidentiary hearing on the defendants' contention that summonses issued during the investigation exceeded the IRS's authority. United States v. Genser [78-2 USTC ¶9682], 582 F. 2d 292 (3d Cir. 1978).

On remand, the district court conducted an evidentiary hearing and concluded that none of the summonses employed during the investigation were issued "solely for a criminal purpose," as defined in LaSalle. In challenging that ruling, defendants argue that the district court erred in two respects: first, in denying them adequate discovery, and second, in misconstruing the substantive requirements of LaSalle itself.

[Background]

I. The IRS conducted an initial audit of defendants' books and records in 1971 but discovered no deficiencies. In 1974 the IRS reopened the investigation that eventually led to defendants' convictions. Our earlier opinion adequately set forth the factual predicate of those convictions. See 582 F. 2d at 295-96. Before the recent evidentiary hearing, however, the details of the investigation itself were veiled. The testimony and documents presented at that hearing provide the necessary vehicle to explore the reaches of LaSalle.

According to uncontested testimony, Frank Parisi, a special agent of the IRS, began in August 1974 to investigate defendants' corporate dealings during the taxable years 1969 to 1974. Almost immediately upon assignment to the case, he began to summon records and witnesses under 26 U. S. C. §7602. That provision empowers agents of the IRS to issue summonses

[f]or the purpose of ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax or the liability at law or in equity of any transferee or fiduciary of any person in respect of any internal revenue tax, or collecting any such liability. . . .

On November 12, 1974, after issuing nineteen summonses, Parisi requested permission to reopen a formal investigation in light of new evidence from a confidential source. In the memorandum accompanying his request Parisi asserted that "[t]he investigation to date has disclosed a conspiracy between GENSER FORMAN, INC. owners and employees and various vendors, to generate currency by the use of fictitious invoices." Parisi's request to reopen was approved sequentially by his group supervisor, the chief of the audit branch of his field office, his district director, and, on November 22, 1974, the chief of the IRS's Intelligence Division, now called the Criminal Investigation Division. See 43 Fed. Reg. 53030 (Nov. 15, 1978).

By December 6, 1974, Parisi had begun to encounter what he believed to be recalcitrance on the part of some of the summonsed witnesses. On that date he filed a "Request for Reluctant Witness Grand Jury Authorization" pursuant to a now-revoked provision in the IRS Manual. Under that provision an IRS agent could request the assistance of a permanent grand jury in securing the testimony of reluctant witnesses. Parisi had discussed resort to this procedure with David Gaston, the IRS's Regional Counsel. As required by the Manual, the chief of the Intelligence Division approved the authorization on December 9, 1974, and forwarded the request to the United States Attorney, who approved on December 18, 1974. Although Parisi had requested grand jury subpoenas for only three persons, a total of six witnesses eventually were served. Only one witness ever had to appear before the grand jury. During this process Parisi was in almost daily contact with the United States Attorney.

Parisi substantially completed his investigation in March 1975. By that time he had issued a total of 106 summonses under section 7602. During the next six months, while writing his final report, he issued nine more summonses.

On October 31, 1975, approximately one month after Parisi filed his final report recommending prosecution, another agent assigned to the case issued the 116th and final summons. Although the record is unclear, Parisi's recommendation must have been reviewed by the district chief of the Intelligence Division sometime between September and November 1975, because it reached the Office of Regional Counsel in November or December of that year. See 26 C. F. R. §601.107(b) and (c). The Office of Regional Counsel formally referred the case to the Justice Department for prosecution on December 12, 1975. The IRS issued no summonses after that referral.

In considering this chain of events in light of LaSalle, the district court held that all the summonses were valid:

[T]he Court finds that the defendants have failed to demonstrate by a preponderance of the evidence that the Internal Revenue Service at the time any of the summonses were issued had either allready referred the matter to the United States Department of Justice or had itself determined that it was interested solely in the criminal tax aspects of the matter.

I further find by a preponderance of the evidence that the United States has demonstrated that throughout the course of the investigation the Internal Revenue Service was at all times interested [in] and actively pursuing substantial amounts of tax penalties and interest owed by the defendant Genser and the defendant Forman to the Treasury of the United States .

As we requested, the district court certified its findings and the record of the proceeding to this court.

[LaSalle Case]

II. In our earlier opinion in this case we focused on defendants' contentions that they had standing to challenge the summonses and that evidence secured through invalid summonses must be suppressed. We did not attempt to examine LaSalle's substantive implications, leaving that task to the district court in the first instance. We therefore turn to the Supreme Court's opinion in LaSalle before considering defendants' substantive and procedural challenges to the disposition below.

A. In LaSalle the Supreme Court elaborated upon its earlier indications that a summons could not issue under section 7602 solely to advance a criminal investigation. See Donaldson v. United States [71-1 USTC ¶9173], 400 U. S. 517, 533 (1971). See also Reisman v. Caplin [64-1 USTC ¶9202], 375 U. S. 440, 449 (1964). Justice Blackmun, writing for the majority, explained that Congress, in authorizing such summonses, had intended to aid the IRS in the civil collection of delinquent taxes. Congress did not intend to usurp the traditional role of the grand jury as the primary investigator of criminal activity. "[S]ummons authority does not exist to aid criminal investigations solely." -- U. S. at --, 98 S. Ct. at 2367 n. 18.

The conundrum, as both the majority and the dissent recognized, is identifying those summonses that are issued "solely" to aid the criminal aspects of the investigation; criminal liability for tax evasion automatically spawns civil liability for tax delinquencies. In LaSalle the investigating agent had stated that his inquiry was "strictly related to criminal violations of the Internal Revenue Code." -- U. S. at --, 98 S. Ct. at 2360. Nevertheless, the Supreme Court rejected the taxpayer's contention that the summonses necessarily lacked a civil purpose and should not be enforced. The entire Court agreed that the agent could not commit the IRS to a criminal prosecution and therefore his subjective intent was not dispositive.

The dissenting justices would have applied an objective test. If the summons issued before the IRS officially referred the case to the Department of Justice for prosecution, then it would be deemed to serve a civil purpose. If it issued after referral, it would be invalid.

The majority, while agreeing with the dissenters that all summonses issued after official referral would be invalid, held that in some cases the "institutional posture" of the IRS would preclude the issuance of a civil summons even before referral to the Department of Justice:

We shall not countenance delay in submitting a recommendation to the Justice Department when there is an institutional commitment to make the referral and the Service merely would like to gather additional evidence for the prosecution.

-- U. S. at --, 98 S. Ct. at 2367-68.

Justice Blackmun noted that use of a civil summons in such circumstances would expand impermissibly the government's right to criminal discovery. Furthermore, in some cases the IRS might become "an information gathering agency for other departments, including the Department of Justice. . . ." Id. at --, 98 S. Ct. at 2368.

In summarizing the Court's holding, Justice Blackmun stressed "several requirements for enforcement of an internal revenue summons." One requirement was that "the Service not abandon in an institutional sense . . . the pursuit of civil tax determination or collection." -- U. S. at --, 98 S. Ct. at 2368. According to the majority, however, "those opposing enforcement of a summons . . . bear the burden to disprove the actual existence of a valid civil tax determination or collection purpose by the Service." Id. at --, 98 S. Ct. at 2367.

B. In this case the government argues that LaSalle permits the IRS, at any time before official referral, to issue summonses as long as that agency continues to pursue civil aspects of the investigation. The district court seemed to be persuaded by this interpretation, which draws some support from a decision of the Second Circuit. See United States v. Marine Midland Bank of New York [78-2 USTC ¶9769], 585 F. 2d 36, 39 (2d Cir. 1978) (per curiam) (the "only" inquiry under LaSalle is "whether the IRS 'in an institutional sense had abandoned its pursuit of . . . civil tax liability.'"). In support of its position on this issue, the government cites considerable evidence that the IRS was attempting throughout its investigation to ascertain the exact amount of tax owed by defendants. That attempt finally resulted in a jeopardy assessment against the defendants.

We recognize that Justice Blackmun wrote in LaSalle of the necessity for the taxpayer to prove that the IRS had "abandoned" a civil purpose. We do not believe, however, that the existence of a general civil purpose for the investigation terminates judicial inquiry. The government has failed to recognize that, under LaSalle, we must focus on the purposes of individual summonses and not on the purpose of the investigation as a whole. In this case, for example, the IRS issued 116 Summonses under section 7602. If any one of those summonses were issued solely for a criminal purpose, the fruits of that summons would have to be suppressed, even in the face of an overwhelmingly civil purpose of the investigation as a whole. The IRS simply would lack statutory authority to issue that particular summons.

Several factors make the government's reading of LaSalle unreasonable. First, if the district court limits its inquiry to the existence vel non of a general civil purpose for the investigation, the abuses delineated by the LaSalle majority would go undetected and unremedied. For example, Justice Blackmun expressed a fear that the IRS might delay official referral to the Justice Department "merely . . . to gather additional evidence for the prosecution." -- U. S. at --, 98 S. Ct. at 2368. Under the government's reading of LaSalle, such a delay would be perfectly permissible, regardless of the purpose of the individual summonses, as long as the IRS had not yet determined the full scope of civil liability. Similarly, the government presumably would allow the Justice Department to use the IRS as an "information gathering agency" as long as the IRS had not closed its civil investigation. LaSalle, of course, prohibits such subterfuge. Id.

Second, by making the existence of a continuing civil purpose for the investigation dispositive, we would impose an impossible burden of proof upon the taxpayer. Not only would he be required to prove a negative, the non-existence of a general civil purpose for the investigation, but he also would be required to disprove what already has been postulated, the congruence of criminal and civil liability. See -- U. S. at --, 98 S. Ct. at 2367. As the district court noted in this case, "it is almost impossible to conceive of a case where there can be a criminal violation . . . without civil tax consequences."

By requiring a link between each summons and the proffered civil purpose, we are not requiring a district court to examine every summons issued in every investigation. LaSalle itself suggests clear limitations on the necessary inquiry. First, under LaSalle, the subjective intent of the agent issuing the summons does not bind the IRS as an institution. Drawing from this axiom, we believe that summonses issued by an investigating agent before that agent recommended prosecution would be virtually unassailable. Cf. United States v. Schutterle, 78-2 USTC ¶9773 (8th Cir. 1978) (issuance of summons one year before agent recommended prosecution "precludes any inference" that summons violates LaSalle. We say "virtually" only because we can envision circumstances where, for example, an agent issued summonses at the request of the United States Attorney or delayed his recommendation at the request of his superiors solely to further a criminal investigation. Such abuses would go to the heart of the protections afforded taxpayers by LaSalle.

More suspect, of course, would be those summonses issued after an agent has recommended prosecution. Even in the case of such a summons, however, the taxpayer would bear the burden of proving both a pre-existing institutional commitment to prosecute and a failure of the summons to advance any civil purpose. The IRS, on the other hand, could deflect such a challenge simply by demonstrating that each summons issued after the agent's recommendation did, in fact, have a civil purpose.

We believe that our interpretation of LaSalle has several salutory effects. It encourages agents to complete their investigations before recommending prosecution. It discourages, but does not preclude, the issuance of summonses after such a recommendation, when the potential for abusive institutional delay is greatest. Finally, it recognizes that each and every summons issued under section 7602 must contribute in some way to a civil inquiry.

In this case, we note that the district court specifically rejected defendants' contention that Agent Parisi was influenced in his investigation by the Department of Justice. The district court found that "the defendants have failed to establish that Agent Parisi was, in fact, acting under the auspices of the United States Attorney prior to the time [of] the criminal reference letter of December 12, 1975." We believe that this finding is supported by substantial evidence. Cf. United States v. Chemical Bank, No. 78-6076 (2d Cir., filed Jan. 17, 1979) (IRS agent's participation in Justice Department Strike Force did not violate LaSalle).

The district court failed, however, to confront defendants' claim that the IRS, as an institution, had committed itself before December 12, 1975, to refer the case for prosecution and that summonses issued after that commitment served no civil purpose. Although Agent Parisi asserted that all 116 summonses were issued for a civil purpose, the district court did not make such a finding. Instead, it was content to find that the IRS maintained a continuing civil interest in the outcome of the investigation. As we have demonstrated, such a general civil purpose could not ratify an otherwise illegal summons.

In support of the existence of institutional commitment to prosecute, defendants cite Agent Parisi's suspicion of criminal activity as recorded in his reopening memorandum and his use of the grand jury to compel testimony. Although both these phases of the investigation required the approval of Parisi's superiors, we doubt that these factors, by themselves, could support a finding of institutional commitment to prosecute. We feel compelled, however, to remand this case to the district court for a specific finding on defendants' contention, especially in light of Parisi's testimony that he did not file his final report until five months after the investigation was substantially complete. Inordinate and unexplained delays in the investigatory process are one factor that might lead a court to infer that an agent was acting at the behest of his superiors solely to pursue criminal aspects of the investigation. Summonses issued during such a delay merit a court's special attention. Furthermore, we note that one summons was issued after Parisi had filed his final report.

Under these circumstances, we believe that the district court is in a better position than are we to weigh the evidence and to draw conclusions about possible institutional commitment.

C. Having outlined the substantive implications of LaSalle, we now must consider defendants' contention that the district court improperly limited their discovery before and during the evidentiary hearing. Prior to the hearing the district court denied defendants' motions to discover the contents of the IRS's investigatory files on the case, except insofar as the government consented. Defendants responded by subpoenaing the appearance of twenty witnesses at the hearing, including the Commissioner of Internal Revenue, the United States Attorney for the District of New Jersey, and various high-ranking officials of the Criminal Tax Section of the Department of Justice. Each subpoena directed the witness to produce all documents relating to the case. The district court refused to enforce any of the subpoenas. Agent Parisi testified at the hearing, but the district court refused to order him to open his files. Instead, the district court granted defendants limited discovery of documents relating to phases of the investigation brought out during Parisi's testimony.

Our reading of LaSalle suggests several guidelines for discovery. At a minimum, the taxpayer should be entitled to discover the identities of the investigating agents, the date the investigation began, the dates the agent or agents filed reports recommending prosecution, the date the district chief of the Intelligence Division or Criminal Investigation Division reviewed the recommendation, the date the Office of Regional Counsel referred the matter for prosecution, and the date of all summaries issued under 26 U. S. C. §7602. Furthermore, the taxpayer should be entitled to discover the nature of any contacts, relating to and during the investigation, between the investigating agents and officials of the Department of Justice.

Where this information or other evidence introduced by the taxpayer reveals (1) that the IRS issued summonses after the investigating agents recommended prosecution, (2) that inordinate and unexplained delays in the investigation transpired, or (3) that the investigating agents were in contact with the Department of Justice, the district court must allow the taxpayer to investigate further. In proper cases, this investigation could include the opportunity to examine the IRS agents or officials involved, or to discover documents. Such examination/discovery, however, should be carefully tailored to meet the purpose of the inquiry. On the other hand, where this information indicates that none of these three conditions are present, the district court need inquire no further.

In this case the district court's rulings conformed very closely to these guidelines. During Parisi's testimony the district court allowed defendants to discover the available documents relating to the reopening of the investigation and the use of the grand jury. Furthermore, defendants learned virtually all the dates listed above, except perhaps the date of review by the district chief of the Intelligence Division. Although defendants had the opportunity to press Parisi on the five-month delay in the filing of his report and on the issuance of a summons after that filing, they did not pursue those matters. In considering these issues, on remand, the district court should determine whether to afford defendants additional discovery and whether to conduct further proceedings.

[Conclusion]

III. Although we share the government's concern that defendants accused of tax evasion may employ the outlined procedures to delay or frustrate justice, we feel obligated to provide a procedural mechanism to vindicate LaSalle's substantive guarantees. In the absence of congressional action defining the scope of the IRS's power to issue summonses, courts must continue to search for the vague boundary between civil and criminal investigation.

We will retain jurisdiction over this appeal and will remand to the district court for appropriate proceedings and findings and for prompt certification of the supplemental record to this court.

[Dissenting Opinion]

BIGGS, Circuit Judge, dissenting:

116 section 7602 summonses were issued during the following periods: 1 through 19: August 28 to November 12, 1974; 20 through 99: November 12, 1974 to January 31, 1975; and 100 through 116: January 31 to October 31, 1975. Further, there is evidence in the record establishing the fact that each of these summonses was issued as part of simultaneous civil and criminal investigations.

Agent Parisi testified on re-direct examination by Mr. Mendelson, an Assistant United States Attorney, as follows:

"Q. [By Mr. Mendelson] We indicated earlier this morning [that] 116 [Section 7602] summonses were served during your investigation, is that correct?

A. I believe that's true. [Emphasis added.]

Q. Were any of those summons issued solely for the purpose of acquiring criminal evidence?

A. No, sir.

Q. What was your purpose in issuing each and every one of these summonses generally?

A. There was a two-fold purpose; to determine any income tax liability of the taxpayers, and to gather evidence to assist the Internal Revenue Service to determine whether or not there has been a criminal violation of the Internal Revenue laws. [Emphasis added.]

Q. When you say "taxpayers" who do you mean?

A. Corporate taxpayer Genser-Forman, Incorporated, Lester Genser and Laurence Forman. (Evidentiary Hearing at 176).

It is clear from the foregoing portion of the record of the evidentiary hearing that the 116th section 7602 summons was brought to the attention of the court and counsel at the evidentiary hearing, and it is also clear from that portion of the evidentiary hearing quoted above that Parisi testified that the purpose of the 116th summons was to gain evidence for the civil recovery of unpaid taxes and also to determine whether or not there was criminal liability.

I do not doubt that United States v. LaSalle National Bank [78-2 USTC ¶9501], -- U. S. -- (1978), governs the case at bar. The teaching of the Supreme Court in LaSalle is exactly expressed, in my view, by Nuzum, LaSalle National Bank and the Judicial Defenses to the Enforcement of an Administrative Summons, 32 The Tax Lawyer 383, 391 (1979), as follows:

B. Supreme Court Opinion. In a 5-4 decision authored by Justice Blackmun, the Supreme Court reversed the Seventh Circuit's opinion and held (1) that a summons must be issued before the Service recommends prosecution to the Department of Justice; ¹ (2) that a summons issued prior to such recommendation must be issued in good faith and that a summons issued solely for a criminal investigation is not in good faith; and (3) that the Service is not using its summons authority in good faith if it has abandoned, in an institutional sense, the pursuit of civil tax determination or collection.

To the above I add the following by way of further interpretation of LaSalle. To enforce a section 7602 summons, the IRS must have issued it in good faith use of the authority of section 7602. The IRS must not abandon its institutional authority to determine and collect taxes and civil fraud penalties. The IRS also must not abandon its institutional authority to determine the existence of violation of criminal laws relating to taxation. The two functions are intertwined. That a single agent has in mind gathering evidence for a criminal investigation does not prove institutional bad faith on the part of the IRS. A taxpayer in order to escape the effect of a section 7602 summons must disprove the existence of a valid civil tax determination or collection purpose by the IRS. This the appellants cannot do, for there was, and apparently still is, a valid civil tax investigation resulting in tax liens against the appellants which were in fact ameliorated to some extent by the agreement to release some of the appellants' assets. See Exhibit G-6 (Evidentary Hearing at 227).

For the reasons stated, I must respectfully dissent. I deem another evidentiary hearing, which the majority opinion requires, as unnecessary and I would grant the motion of the United States and immediately send down the certified judgment in lieu of the formal mandate. ²

¹ The referral letter of the Internal Revenue Service to the Department of Justice was dated December 12, 1975.

Parisi's final report was forwarded to the Regional Counsel in September 1975 (Evidentiary Hearing at 62), and the evidentiary hearing upon our remand, when Parisi made the statements quoted above, was October 31, 1978.

² The majority lays emphasis on what it regards as "inordinate and unexplained delays in the investigation" (Majority Opinion at 10). The time factor is not relevant in view of the fact that there was investigation by the IRS as to civil as well as criminal liability during the critical period.

The following dates are relevant:

The last summons, No. 116 (by Gary Neuberger), was issued October 31, 1975 (Evidentiary Hearing at 61).

Agent Parisi started to write his report in March of 1975 (Evidentiary Hearing at 61).

Agent Parisi's final report was sent to the Regional Counsel in September of 1975 (Evidentiary Hearing at 62).

Referral to the Department of Justice for prosecution was December 12, 1975 (Evidentiary Hearing at 143-44).

I believe the majority refers to the lapse of time between the date when Parisi started his report and the date he sent it to the Regional Counsel. This lapse was less than six months.

I believe this delay and any others have little significance, if, in fact, delays they be. Judicial notice may be taken of the fact that the IRS does not move with startling speed. To my mind, the delay or delays not only seem short, but to me Parisi seems to have acted with reasonable promptness.

 

 

[78-2 USTC ¶9501]United States et al., Petitioner v. LaSalle National Bank et al.

Supreme Court of the United States, No. 77-365, 437 US 298, 98 SCt 2357, 6/19/78, Reversing and remanding, CA-7, 77-1 USTC ¶9344, 554 F. 2d 302

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

[Code Sec. 7602--result unchanged by 1976 Tax Reform Act]

Summons: Enforcement of: Proper v. improper purpose: Criminal investigation.--A summons that compelled a bank to produce files of land trusts created for the benefit of a taxpayer was enforceable even though the investigation was conducted solely by a special agent of the IRS. The bank did not show that the agent had recommended criminal prosecution to the Justice Department when the summons was issued, that he already possessed all the evidence sought in the summons. The case was remanded for a determination as to whether IRS in an institutional sense had abandoned pursuit of the taxpayer's civil liability. The good faith of the IRS is not negated by the fact that a single special agent intends only to gather evidence for a criminal investigation--to bar enforcement, it must be shown that no valid civil determination or collection purpose by the IRS exists.

Four Justices dissented.

Matt P. Cushner, Gregory J. Perry, Pedersen & Houpt, 180 N. LaSalle St., Chicago, Ill. 60601, for petitioners. Wade H. McCree, Jr., Solicitor General, M. Carr Ferguson, Assistant Attorney General, Lawrence G. Wallace, Deputy Solicitor General, Stuart A. Smith, Assistant to the Solicitor General, Rob ert E. Lindsay, Charles E. Brookhart, Carleton D. Powell, Department of Justice, Washington, D. C. 20530, for respondents.

Syllabus

Petitioner special agent of the Internal Revenue Service (IRS), in the process of investigating a taxpayer's tax liability, issued summonses to respondent bank under authority of §7602 of the Internal Revenue Code of 1954 (which permits use of a summons "[f]or the purpose of ascertaining the correctness of any return, . . . determining the liability of any person for any internal revenue tax . . ., or collecting any such liability") to appear before the agent and produce files of certain land trusts, created for the benefit of the taxpayer. When respondent bank official appeared in response to the summons but refused to produce the files, the United States and the agent petitioned the District Court for enforcement of the summonses. That court denied enforcement, finding that the summonses were not issued in good faith because they were issued "solely for the purpose of unearthing evidence of criminal conduct" by the taxpayer. The Court of Appeals affirmed. Held: The District Court erred in refusing to enforce the summonses, since its finding that the agent was investigating the taxpayer "solely for the purpose of unearthing evidence of criminal conduct" does not necessarily lead to the conclusion that the summonses were not issued in good-faith pursuit of the congressionally authorized purposes of §7602. Pp. 9-20.

(a) Congress has not categorized tax fraud investigation into civil and criminal components but has created a tax enforcement system in which criminal and civil elements are inherently intertwined, and any limitation on the good-faith use of an IRS summons must reflect this statutory premise. Pp. 9-13.

(b) To enforce a summons under §7602, the primary requirement is that it be issued before the IRS recommends to the Department of Justice the initiation of a criminal prosecution relating to the subject matter of the summons. This is a prophylactic rule designed to protect the standards of criminal litigation discovery and the role of the grand jury as a principal tool of criminal accusation. Pp. 13-14.

(c) Enforcement of a summons is also conditioned upon the good-faith use of the summons authority by the IRS, which must not abandon its institutional responsibility to determine and to collect taxes and civil fraud penalties. That a single special agent intends only to gather evidence for a criminal investigation is not dispositive of the good faith of the IRS as an institution. Those resisting enforcement of a summons must disprove the actual existence of a valid civil tax determination or collection purpose by the IRS. Pp. 15-19.

(d) On the record here respondents have not shown sufficient justification to preclude enforcement of the summonses in question, absent any recommendation to the Justice Department for criminal prosecution and absent any showing that the special agent already possessed all of the evidence sought in the summonses or that the IRS in an institutional sense had abandoned pursuit of the taxpayer's civil tax liability. Pp. 19-20.

554 F. 2d 302, reversed with directions to remand.

BLACKMUN, J., delivered the opinion of the Court, in which BRENNAN, WHITE, MARSHALL, and POWELL, JJ., joined. STEWART, J., filed a dissenting opinion, in which BURGER, C. J., and REHNQUIST and STEVENS, JJ., joined.

MR. JUSTICE BLACKMUN delivered the opinion of the Court.

This case is a supplement to our decision in Donaldson v. United States [71-1 USTC ¶9173], 400 U. S. 517 (1971). It presents the issue whether the District Court correctly refused to enforce Internal Revenue Service summonses when it specifically found that the special agent who issued them "was conducting his investigation solely for the purpose of unearthing evidence of criminal conduct." 76-1 USTC 84,072, 84,073, 37 A. F. T. R. 2d 76-1239, 76-1240 (ND Ill. 1976).

I. In May 1975, John F. Olivero, a special agent with the Intelligence Division of the Chicago District of the Internal Revenue Service (hereinafter IRS or the Service), received an assignment to investigate the tax liability of John Gattuso for his taxable years 1970-1972. App. 26-27, 33. Olivero testified that he had requested the assignment because of information he had received from a confidential informant and from an unrelated investigation. Id. , at 35. The case was not referred to the IRS from another law enforcement agency, but the nature of the assignment, Olivero testified, was "[t]o investigate the possibility of any criminal violations of the Internal Revenue Code." Id. , at 33. Olivero pursued the case on his own, without the assistance of a revenue agent. ¹ He received information about Gattuso from the Federal Bureau of Investigation as a result of the previous investigation. Id. , at 36. He solicited and received additional data from the United States Attorney for the Northern District of Illinois, the Secret Service, the Department of Housing and Urban Development, the IRS Collection Division, and Cosmopolitan National Bank of Chicago . Id. , at 37-40.

Mr. Gattuso's tax returns for the years in question disclosed rental income from real estate. That property was held in Illinois land trusts ² by respondent LaSalle National Bank, as trustee, a fact revealed by land trust files collected by the IRS from banks. Id. , at 27, 45. In order to determine the accuracy of Gattuso's income reports, Olivero proceeded to issue two summonses, under the authority of §7602 of the Internal Revenue Code of 1954, 26 U. S. C. §7602, ³ to respondent bank. Each summons related to a separate trust and requested, among other things, that the bank as trustee appear before Olivero at a designated time and place and produce its "files relating to Trust No. 31544 [or No. 35396] including the Trust Agreement" for the period 1970 through 1972 and also "all deeds, options, correspondence, closing statements and seller statements, escrows, and tax bills pertaining to all property held in the trust at any time during" that period. App. 9-16. Respondent Joseph W. Lang, a vice president of the bank, appeared in response to the summonses but, on advice of counsel, refused to produce any of the material requested. Brief for Respondents 2.

The United States and Olivero, pursuant to §§ 7402(b) and 7604(a) of the Code, 26 U. S. C. §§ 7402(b) and 7604(a), ⁴ then petitioned the United States District Court for the Northern District of Illinois for enforcement of the summonses. App. 5. This was on November 11, 1975. Olivero testified that when the petition was filed he had not determined whether criminal charges were justified and had not made any report or recommendation about the case to his superiors. Id. , at 30. It was alleged in the petition and in an incorporated exhibit that the requested materials were necessary for the determination of the tax liability of Gattuso for the years in question and that the information contained in the documents was not in the possession of the petitioners. Id. , at 7, 17-18. The District Court entered an order to show cause, id., at 19, and respondents answered through counsel, who also represented Gattuso. Id. , at 20-22.

At the ensuing hearing and in a post-hearing brief, respondents argued that Olivero's investigation was "purely criminal" in nature. Id. , at 82. Gregory J. Perry, a lawyer specializing in federal taxation and employed by the same law firm that filed the answer, testified that in June 1975 Olivero told him that the Gattuso investigation "was strictly related to criminal violations of the Internal Revenue Code." Id. , at 52. Respondents conceded that they bore the burden of proving that enforcement of the summons would abuse the court's process, but they contended that they did not have to show "that there is no civil purpose to the Summons." Id. , at 87. Instead, they urged that their burden was to show that the summonses were not issued in good faith because "the investigation is solely for the purpose of gathering evidence for use in a criminal prosecution." Id. , at 77.

The District Court agreed with respondents' contentions. Although at the hearing the court seemed to recognize "that in any Criminal investigation there's always a probability of civil tax liability," id., at 61, it focused its attention on the purpose of Special Agent Olivero:

"I'll say now that I heard nothing in Agent Olivero's testimony to suggest that the thought of a civil investigation ever crossed his mind.

* * *

"Now, unless I find something in the in camera inspection [of the IRS case file] that gives more support to the Government position than the Agent's testimony did, it would be my conclusion that he was at all times involved in a criminal investigation, at least in his own mind." ⁵

Id. , at 62.

In its written memorandum, the District Court noted that Donaldson permitted the use of the IRS summons issued in good faith and prior to a recommendation for criminal prosecution. Relying on dictum in Reisman v. Caplin [64-1 USTC ¶9202], 375 U. S. 440, 449 (1954), however, the court said that it was an improper use of the summons "to serve it solely for the purpose of obtaining evidence for use in a criminal prosecution." 76-1 USTC at 84,072, 37 A. F. T. R. 2d, at 76-1240. If, at the time of its issuance, the summons served this proscribed purpose, the court concluded, the absence of a formal criminal recommendation was irrelevant, the summons was not issued in good faith, and enforcement was precluded. The court then held:

"It is apparent from the evidence that Special Agent John F. Olivero in his investigative activities had focused upon the possible criminal activities of John Gattuso, and was conducting his investigation solely for the purpose of unearthing evidence of criminal conduct by Mr. Gattuso." Id. , at 84,073, 37 A. F. T. R. 2d, at 76-1240.

The United States Court of Appeals for the Seventh Circuit affirmed. 554 F. 2d 302 (1977). It concluded that the District Court correctly had included the issue of criminal purpose within the good-faith inquiry:

"[T]he use of an admin istrative summons solely for criminal purposes is a quintessential example of bad faith. . . .

* * *

"We note that the district court formulated its factual finding by use of the expression 'sole criminal purpose' rather than by a label such as 'bad faith.' We find no basis for reversible error in that verbal formulation. The district court grasped the vital core of Donaldson and rendered its factual finding consistently therewith." Id. , at 309.

The Court of Appeals further decided that the District Court had reached a factual, rather than a legal, conclusion when it found the summonses to have been issued solely for a criminal prosecution. Id. , at 305. Appellate review, accordingly, was limited to application of the clearly erroneous standard. Id. , at 306. Although the Court of Appeals noted that Olivero had testified about the existence of a civil purpose for the investigation, the court said that "the record establishes that the district court did not believe him." Id. , at 309. The appellate court could not reverse the trial court's judgment, it said, because it was "not left with a firm and definite conviction that a mistake [had] been made." Id. , at 306.

Because of the importance of the issue in the enforcement of the internal revenue laws, and because of conflict among the courts of appeals concerning the scope of IRS summons authority under §7602, ⁶ we granted certiorari. -- U. S. -- (1977).

II. In Donaldson v. United States [71-1 USTC ¶9173], 400 U. S. 517 (1971), an IRS special agent issued summonses to a taxpayer's putative former employer and its accountant for the production of the employer's records of the taxpayer's employment and compensation. When the records were not forthcoming, the IRS petitioned for the enforcement of the summonses. The taxpayer intervened and eventually appealed the enforcement order. This Court addressed the taxpayer's contention that the summonses were unenforceable because they were issued in aid of an investigation that could have resulted in a criminal charge against the taxpayer. His argument there, see id., at 532, was based on the following dictum in Reisman v. Caplin [64-1 USTC ¶9202], 375 U. S. 440, 449 (1964):

"[T]he witness may challenge the summons on any appropriate ground. This would include, as the circuits have held, the defenses that the material is sought for the improper purpose of obtaining evidence for use in a criminal prosecution, Boren v. Tucker [57-1 USTC ¶9246], 239 F. 2d 767, 772-773 . . .."

In the light of the citation to Boren ⁷ the Court in Donaldson concluded that the dictum referred and was applicable "to the situation of a pending criminal charge or, at most, of an investigation solely for criminal purposes." 400 U. S. , at 533.

Discerning the meaning of the brief Reisman dictum, however, did not resolve for the Court the question posed by Donaldson. The validity of the summonses depended ultimately on whether they were among those authorized by Congress. ⁸ Having reviewed the statutory scheme, 400 U. S. , at 523-525, the Court concluded that Congress had authorized the use of summonses in investigating potentially criminal conduct. The statutory history, particularly the use of summonses under the Internal Revenue Code of 1939, ⁹ supported this conclusion, as did consistent IRS practice and decisions concerning effective enforcement of other comparable federal statutes. ¹⁰ The Court saw no reason to force the Service to choose either to forego the use of congressionally authorized summonses or to abandon the option of recommending criminal prosecutions to the Department of Justice. ¹¹

As long as the summonses were issued in good-faith pursuit of the congressionally authorized purposes, and prior to any recommendation to the Department for prosecution, they were enforceable. 400 U. S. at 536.

III The present case requires us to examine the limits of the good-faith use of an Internal Revenue summons issued under §7602. As the preceding discussion demonstrates, Donaldson does not control the facts now before us. There, the taxpayer had argued that the mere potentiality of criminal prosecution should have precluded enforcement of the summons. 400 U. S. at 532. Here, on the other hand, the District Court found that Special Agent Olivero was investigating Gattuso "solely for the purpose of unearthing evidence of criminal conduct." 76-1 U. S. T. C., at 84,073, 37 A. F. T. R. 2d, at 76-1240. The question then becomes whether this finding necessarily leads to the conclusion that the summonses were not issued in good-faith pursuit of the congressionally authorized purposes of §7602.

A

The Secretary of the Treasury and the Commissioner of Internal Revenue are charged with the responsibility of admin istering and enforcing the Internal Revenue Code. 26 U. S. C. §§ 7801 and 7802. Congress, by §7601(a), has required the Secretary to canvass revenue districts to "inquire after and concerning all persons therein who may be liable to pay any internal revenue tax." With regard to suspected fraud, these duties encompass enforcement of both civil and criminal statutes. The willful submission of a false or fraudulent tax return may subject a taxpayer not only to criminal penalties under §§ 7206 and 7207 of the Code, but, as well, to a civil penalty, under §6653(b), of 50% of the underpayment. And §6659(a) provides that the civil penalty shall be considered as part of the tax liability of the taxpayer. Hence, when §7602 permits the use of a summons "[f]or the purpose of ascertaining the correctness of any return, . . . determining the liability of any person for any internal revenue tax . . ., or collecting any such liability," it necessarily permits the use of the summons for examination of suspected tax fraud and for the calculation of the 50% civil penalty. In Donaldson, 400 U. S. , at 535, we clearly noted that §7602 drew no distinction between the civil and the criminal aspects; that it "contains no restriction"; that the corresponding regulations were "positive"; and that there was no significance, "for civil as compared with criminal purposes, at the point of a special agent's appearance." The Court then upheld the use of summonses even though fraudulent conduct carried the potential of criminal liability. The Court repeated this emphasis in Couch v. United States [73-1 USTC ¶9159], 409 U. S. 322, 326 (1973):

"It is now undisputed that a special agent is authorized, pursuant to 26 U. S. C. §7602, to issue an Internal Revenue summons in aid of a tax investigation with civil and possible criminal consequences."

This result is inevitable because Congress has created a law enforcement system in which criminal and civil elements are inherently intertwined. When an investigation examines the possibility of criminal misconduct, it also necessarily inquires about the appropriateness of assessing the 50% civil tax penalty. ¹²

The legislative history of the Code supports the conclusion that Congress intended to design a system with interrelated criminal and civil elements. Section 7602 derives, assertedly without change in meaning, ¹³ from corresponding and similar provisions in §§ 3614, 3615, and 3654 of the 1939 Code. By §3614(a) the Commissioner received the summons authority "for the purpose of ascertaining the correctness of any return or for the purpose of making a return where none has been made." Section 3615(b)(3) authorized the issuance of a summons "[w]henever any person who is required to deliver a monthly or other return of objects subject to tax delivers any return which, in the opinion of the collector, is erroneous, false, or fraudulent, or contains any undervaluation or understatement." Section 3654(a) stated the powers and duties of the collector:

"Every collector within his collection district shall see that all laws and regulations relating to the collection of internal revenue taxes are faithfully executed and complied with, and shall aid in the prevention, detection, and punishment of any frauds in relation thereto. For such purposes, he shall have power to examine all persons, books, papers, accounts, and premises . . . and to summon any person to produce books and papers . . . and to compel compliance with such summons in the same manner as provided in section 3615."

Under §3616 punishment for any fraud included both fine and imprisonment. The 1939 Code, therefore, contemplated the use of the summons in an investigation involving suspected criminal conduct as well as behavior that could have been disciplined with a civil penalty. ¹⁴

In short, Congress has not categorized tax fraud investigations into civil and criminal components. Any limitation on the good faith use of an Internal Revenue summons must reflect this statutory premise.

B

The preceding discussion suggests why the primary limitation on the use of a summons occurs upon the recommendation of criminal prosecution to the Department of Justice. Only at that point do the criminal and civil aspects of a tax fraud case begin to diverge. See United States v. Hodge & Zweig [77-1 USTC ¶9263], 548 F. 2d 1347, 1351 (CA 9 1977); United States v. Billingsley [73-1 USTC ¶9117], 469 F. 2d 1208, 1210 (CA 10 1972). We recognize, of course, that even upon recommendation to the Justice Department, the civil and criminal elements do not separate completely. The Government does not sacrifice its interest in unpaid taxes just because a criminal prosecution begins. Logically, then, the IRS could use its summons authority under §7602 to uncover information about the tax liability created by a fraud regardless of the status of the criminal case. But the rule forbidding such is a prophylactic intended to safeguard the following policy interests.

A referral to the Justice Department permits criminal litigation to proceed. The IRS cannot try its own prosecutions. Such authority is reserved to the Department of Justice and, more particularly, to the United States attorneys. 28 U. S. C. §547(1). Nothing in §7602 or its legislative history suggests that Congress intended the summons authority to broaden the Justice Department's right of criminal litigation discovery or to infringe on the role of the grand jury as a principal tool of criminal accusation. Accord, United States v. Morgan Guaranty Trust Co. [78-1 USTC ¶9235], -- F. 2d -- (CA 2 1978); United States v. Weingarden [73-1 USTC ¶9210], 473 F. 2d 454, 458-459 (CA 6 1973); United States v. O'Connor [53-2 USTC ¶9591], 118 F. Supp. 248, 250-251 (Mass. 1953); see Donaldson v. United States, 400 U. S., at 536; cf. Abel v. United States, 362 U. S. 217, 226 (1960). The likelihood that discovery would be broadened or the role of the grand jury infringed is substantial if post-referral use of the summons authority were permitted. For example, the IRS, upon referral, loses its ability to compromise both the criminal and the civil aspects of a fraud case. 26 U. S. C. §7122(a). After the referral, the authority to settle rests with the Department of Justice. Ibid. Interagency cooperation on the calculation of the civil liability is then to be expected and probably encourages efficient settlement of the dispute. But such cooperation, when combined with the inherently intertwined nature of the criminal and civil elements of the case, suggests that it is unrealistic to attempt to build a partial information barrier between the two branches of the Executive. Effective use of information to determine civil liability would inevitably result in criminal discovery. The prophylactic restraint on the use of the summons effectively safeguards the two policy interests while encouraging maximum interagency cooperation. ¹⁵

C

Prior to a recommendation for prosecution to the Department of Justice, the IRS must use its summons authority in good faith. Donaldson v. United States, 400 U. S. , at 536; United States v. Powell [64-2 USTC ¶9858], 379 U. S. 48, 57-58 (1964). In Powell, the Court announced several elements of a good-faith exercise:

[The Service] must show that the investigation will be conducted pursuant to a legitimate purpose, that the inquiry may be relevant to the purpose, that the information sought is not already within the Commissioner's possession, and that the admin istrative steps required by the Code have been followed. . . . [A] court may not permit its process to be abused. Such an abuse would take place if the summons had been issued for an improper purpose, such as to harass the taxpayer or to put pressure on him to settle a collateral dispute, or for any other purpose reflecting on the good faith of the particular investigation (footnote omitted). Ibid.

A number of the Courts of Appeals, including the Seventh Circuit in this case, 554 F. 2d at 309, have said that another improper purpose, which the Service may not pursue in good faith with a summons, is to gather evidence solely for a criminal investigation. ¹⁶ The courts have based their conclusions in part on Donaldson's expanation of the Reisman dictum. The language of Donaldson, however must be read in the light of the recognition of the interrelated criminal/civil nature of a tax fraud inquiry. For a fraud investigation to be solely criminal in nature would require an extraordinary departure from the normally inseparable goals of examining whether the basis exists for criminal charges and for the assessment of civil penalties.

In this case, respondents submit that such a departure did indeed occur because Special Agent Olivero was interested only in gathering evidence for a criminal prosecution. We disagree. The institutional responsibility of the Service to calculate and to collect civil fraud penalties and fraudulently reported or unreported taxes is not necessarily overturned by a single agent who attempts to build a criminal case. The review process over and above his conclusions is multilayered and thorough. Apart from the control of his immediate supervisor, the agent's final recommendation is reviewed by the district chief of the Intelligence Division, 26 CFR §§ 601.107(b) and (c) (1977); Internal Revenue Manual, ch. 9600, ¶9621.1, 9622.1, 9623 (1977); see Donaldson v. United States, 400 U. S., at 534. The Office of Regional Counsel also reviews the case before it is forwarded to the National Office of the Service or to the Justice Department. 26 CFR §601.107(c) (1977); Internal Revenue Service Organization and Functions §1116(3), 39 Fed. Reg. 11602 (1974); Internal Revenue Manual, ch. 9600, ¶9624, 9631.2, 9631.4 (1977). If the Regional Counsel and the Assistant Regional Commissioner for Intelligence disagree about the disposition of a case, another complete review occurs at the national level centered in the Criminal Tax Division of the Office of General Counsel. Internal Revenue Service Organization and Functions §1113(11) 22, 39 Fed. Reg. 11599 (1974); Internal Revenue Manual, ch. 9600, ¶9651(1) (1977). Only after the officials of at least two layers of review have concurred in the conclusion of the special agent does the referral to the Department of Justice take place. At any of the various stages, the Service can abandon the criminal prosecution, can decide instead to assert a civil penalty, or can pursue both goals. While the special agent is an important actor in the process, his motivation is hardly dispositive.

It should also be noted that the layers of review provide the taxpayer with substantial protection against the hasty or overzealous judgment of the special agent. The taxpayer may obtain a conference with the district Intelligence Division officials upon request or whenever the chief of the Division determines that a conference would be in the best interests of the Government. 26 CFR §601.107(b)(2) (1977); Internal Revenue Manual, ch. 9300, ¶9356.1 (1977). If prosecution has been recommended the chief notifies the taxpayer of the referral to the Regional Counsel. 26 CFR §601.107(c) (1977); Internal Revenue Manual, ch. 9300, ¶9355 (1977).

As in Donaldson, then, where we refused to draw the line between permissible civil and impermissible criminal purposes at the entrance of the special agent into the investigation, 400 U. S. , at 536, we cannot draw it on the basis of the agent's personal intent. To do so would unnecessarily frustrate the enforcement of the tax laws by restricting the use of the summons according to the motivation of a single agent without regard to the enforcement policy of the Service as an institution. Furthermore, the inquiry into the criminal enforcement objectives of the agent would delay summons enforcement proceedings while parties clash over, and judges grapple with, the thought processes of each investigator. ¹⁷ See United States v. Morgan Guaranty Trust Co., supra. This obviously is undesirable and unrewarding. As a result, the question whether an investigation has solely criminal purposes must be answered only by an examination of the institutional posture of the IRS. Contrary to the assertion of respondents, this means that those opposing enforcement of a summons do bear the burden to disprove the actual existence of a valid civil tax determination or collection purpose by the Service. After all, the purpose of the good-faith inquiry is to determine whether the agency is honestly pursuing the goals of §7602 by issuing the summons.

Without doubt, this burden is a heavy one. Because criminal and civil fraud liabilities are coterminous, the Service rarely will be found to have acted in bad faith by pursuing the former. On the other hand, we cannot abandon this aspect of the good-faith inquiry altogether. ¹⁸ We shall not countenance delay in submitting a recommendation to the Justice Department when there is an institutional commitment to make the referral and the Service merely would like to gather additional evidence for the prosecution. Such a delay would be tantamount to the use of the summons authority after the recommendation and would permit the Government to expand its criminal discovery rights. Similarly, the good-faith standard will not permit the IRS to become an information-gathering agency for other departments, including the Department of Justice, regardless of the status of criminal cases. ¹⁹

D

In summary, then, several requirements emerge for the enforcement of an IRS summons. ²⁰ First, the summons must be issued before the Service recommends to the Department of Justice that a criminal prosecution, which reasonably would relate to the subject matter of the summons, be undertaken. Second, the Service at all times must use the summons authority in good-faith pursuit of the congressionally authorized purposes of §7602. This second prerequisite requires the Service to meet the Powell standards of good faith. It also requires that the Service not abandon in an institutional sense, as explained in Parts III-A and III-C above, the pursuit of civil tax determination or collection.

IV. In the record before us, respondents have not demonstrated sufficient justification to preclude enforcement of the IRS summons. No recommendation to the Justice Department for criminal prosecution has been made. Of the Powell criteria, respondents challenge only one aspect of the Service's showing: they suggest that Olivero already may possess the evidence requested in the summons. Brief for Respondents 16-19. Although the record shows that Olivero had uncovered the names and identities of the LaSalle National Bank land trusts, it does not show that the Service knows the value of the trusts or their income or the allocation of interests therein. Because production of the bank's complete records on the trusts reasonably could be expected to reveal part or all of this information, which would be material to the computation of Gattuso's tax liability, the Powell criteria do not preclude enforcement. Finally, the District Court refused enforcement because it found that Olivero's personal motivation was to gather evidence solely for a criminal prosecution. The court, however, failed to consider whether the Service in an institutional sense had abandoned its pursuit of Gattuso's civil tax liability. ²¹ The Court of Appeals did not require that inquiry. On the record presently developed, we cannot conclude that such an abandonment has occurred.

The judgment of the Court of Appeals is therefore reversed with instructions to that court to remand the case to the District Court for further proceedings consistent with this opinion.

It is so ordered.

¹ Frequently, a revenue agent of the IRS Audit Division will refer a case on which he is working to the Intelligence Division for investigation of possible fraud. After such a referral, and at other times, the special agent and the revenue agent work together. Because of the importance and sensitivity of the criminal aspects of the joint investigation, the special agent assume control of the inquiry. See, e.g., Internal Revenue Manual, ch. 4500, ¶4563.431-4565.44 (1976 and 1978).

The Audit Division and the Intelligence Division have now been redesignated as the Examinations Division and the Criminal Enforcement Division, respectively. IRS News Release, Feb. 6, 1978.

² Respondents describe an Illinois land trust as follows:

"An Illinois land trust is a contract by which a trustee is vested with both legal and equitable title to real property and the interest of the beneficiary is considered personal property. Under this trust the beneficiary or any person designated in writing by the beneficiary has the exclusive power to direct or control the trustee in dealing with the title and the exclusive control of the management, operation, renting and selling of the trust property together with the exclusive right to the earnings, avails and proceeds of said property. Ill. Rev. Stat. ch. 29, §8.31 (1971)." Brief for Respondents 1-2, n. 1.

³ Section 7602 reads:

"For the purpose of ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax or the liability at law or in equity of any transferee or fiduciary of any person in respect of any internal revenue tax, or collecting any such liability, the Secretary or his delegate is authorized--

"(1) To examine any books, papers, records, or other data which may be relevant or material to such inquiry;

"(2) To summon the person liable for tax or required to perform the act, or any officer or employee of such person, or any person having possession, custody, or care of books of account containing entries relating to the business of the person liable for tax or required to perform the act, or any other person the Secretary or his delegate may deem proper, to appear before the Secretary or his delegate at a time and place named in the summons and to produce such books, papers, records, or other data, and to give such testimony, under oath, as may be relevant or material to such inquiry; and

"(3) To take such testimony of the person concerned, under oath, as may be relevant or material to such inquiry."

⁴ Section 7402(b) states:

"If any person is summoned under the internal revenue laws to appear, to testify, or to produce books, papers, or other data, the district court of the United States for the district in which such person resides or may be found shall have jurisdiction by appropriate process to compel such attendance, testimony, or production of books, papers, or other data."

Section 7604(a) reads:

"If any person is summoned under the internal revenue laws to appear, to testify, or to produce books, papers, records, or other data, the United States district court for the district in which such person resides or is found shall have jurisdiction by appropriate process to compel such attendance, testimony, or production of books, papers, records, or other data."

⁵ The District Court was aware of and recognized the Government's contention that the individual agent's motive in the investigation was not dispositive:

"THE COURT: . . . [U]nder your theory any criminal investigation would not really be one until they closed it because there was always a possibility of a civil liability.

* * *

"If that's the law, you're in trouble, Mr. Cushner [counsel for respondents].

* * *

"I think it boils down to an issue of law so it's the cases really that I'm interested in plus any further clues I may find in the in camera inspection of the investigative file." App. 61-62.

The Court agreed to inspect the IRS investigative file in camera after it refused to permit respondents to inspect the file. Id. , at 50-51, 61-62.

⁶ Compare United States v. Hodge & Zweig [77-1 USTC ¶9263], 548 F. 2d 137, 1350-1351 (CA9 1977); United States v. Zack [75-2 USTC ¶9626], 521 F. 2d 1366, 1368 (CA9 1975); United States v. McCarthy [75-1 USTC ¶9402], 514 F. 2d 368, 374-375 (CA3 1975); United States v. Weingarden [73-1 USTC ¶9210], 473 F. 2d 454, 460 (CA6 1973); United States v. Wall Corp., 154 U. S. App. D. C. 309, 311, [73-1 USTC ¶9122] 475 F. 2d 893, 895 (1972); and United States v Billingsley [73-1 USTC ¶9117], 469 F. 2d 1208, 1210 (CA10 1972); with United States v. Morgan Guaranty Trust Co. [78-1 USTC ¶9235], -- F. 2d --, -- (CA2 1978); and United States v. Troupe, 438 F. 2d 117, 119 (CA8 1971), regarding the conflict about whether the recommendations for criminal prosecution is dispositive of the so-called criminal purpose issue.

Compare United States v. Hodge & Zweig, 548 F. 2d, at 1351; and United States v. Billingsley, 469 F. 2d, at 1210, with United States v. Lafko [75-2 USTC ¶9642], 520 F. 2d 622, 625 (CA3 1975), regarding the conflict about whether the criminal recommendation from the IRS to the Department of Justice or the recommendation from the special agent to his superiors is important in the enforcement inquiry.

⁷ In Boren v. Tucker, 239 F. 2d, at 772-773, the Ninth Circuit distinguished United States v. O'Connor [53-2 USTC ¶9591], 118 F. Supp. 248 ( Mass. 1953), which involved an investigation of a taxpayer already under indictment.

⁸ The Court had concluded earlier that the summoning of the employer's and the accountant's records for an investigation of the taxpayer did not violate the constitutional rights of any of them. 400 U. S. , at 522.

⁹ See §§ 3614, 3615, 3616, and 3654 of the 1939 Code, 53 Stat. 438-440, 446.

¹⁰ See United States v. Kordel, 397 U. S. 1, 11 (1970) (Federal Food, Drug, and Cosmetic Act enforcement), citing Standard Sanitary Mfg. Co. v. United States, 226 U. S. 20, 51-52 (1912) (Sherman Act enforcement).

¹¹ See Part II-B and n. 15, infra.

¹² The interrelated nature of the civil and criminal investigative functions is further demonstrated by the organization and functioning of the Internal Revenue Service. Pursuant to 26 CFR §601.107 (1977), each revenue district has an Intelligence Division, "whose mission is to encourage and achieve the highest possible degree of voluntary compliance with the internal revenue laws." This purpose is implemented by "the investigation of possible criminal violations of such laws and the recommendation (when warranted) of prosecution and/or assertion of the 50 percent ad valorem addition to the tax." Ibid. See generally Internal Revenue Service Organization and Functions §§ 1113.563, 1114.8, and 1118.6, 39 Fed. Reg. 11572 , 11581 , 11601 , and 11607 (1974).

In its Manual for employees, the IRS instructs that the jurisdiction of the Intelligence Division includes all civil penalties except those related to the estimated income tax. Internal Revenue Manual, ch. 4500, ¶4561 (1976). The Manual adds:

"Intelligence features are those activities of developing and presenting admissible evidence required to prove criminal violations and the ad valorem penalties for civil fraud, negligence and delinquency (except those concerning tax estimations) for all years involved in cases jointly investigated to completion." Id. , ¶4565.31(4) (1976).

The Manual also contains detailed instructions for coordination between special agents and revenue agents during investigations of tax fraud, E.g., id., ¶4563.431 (1978), and ¶4565.22, 4565.32, 4565.41-4565.44 (1976).

Statistics for the fiscal year 1976 show that the Intelligence Division has a substantially greater involvement with civil fraud than with criminal fraud. Of 8,797 full-scale tax fraud investigations in that year, only 2,037 resulted in recommendations for prosecution. The 6,760 cases not recommended involved approximately $11 million in deficiencies and penalties. See 1976 Annual Report of the Commissioner of Internal Revenue 33, 61, 152.

¹³ See H. R. Rep. No. 1337, 83d Cong., 2d Sess., A436 (1954); S. Rep. No. 1622, 83d Cong., 2d Sess., 617 (1954).

¹⁴ Internal Revenue officials received similar summons authority in revenue acts prior to the 1939 Code. See, e.g., Revenue Act of 1918, §1305, 40 Stat. 1142; Tariff Act of Oct. 3, 1913, §II ¶I, 38 Stat. 178-179; Act of June 30, 1864, §14, 13 Stat. 226.

The interrelated nature of fraud investigations thus was apparent as early as 1864. Section 14 of the 1864 Act permitted the issuance of a summons to investigate a suspected fraudulent return. It also prescribed a 100% increase in valuation as a civil penalty for falsehood. Section 15 established the criminal penalties for such conduct. Four years later, when Congress created the position of district supervisor, that official received similar summons authority. Act of July 20, 1868, §49, 15 Stat. 144-145; see Cong. Globe, 40th Cong., 2d Sess., 3450 (1868). The federal courts enforced these summonses when they were issued in good faith and in compliance with instructions from the Commissioner. See In re Meador, 16 F. Cas. 1294, 1296 (ND Ga. 1869); Stanwood v. Green, 22 F. Cas. 1077, 1079 (ND Miss. 1870) ("it being understood that this right upon the part of the supervisor extends only to such books and papers as relate to their banking operations, and are connected with the internal revenue of the United States").

¹⁵ The Third Circuit has suggested that our reference in Donaldson to the recommendation for criminal prosecution ("We hold that under §7602 an internal revenue summons may be issued in aid of an investigation if it is issued in good faith and prior to a recommendation for criminal prosecution," 400 U. S., at 536) intended to draw a line at the recommendation to the Service's district office from the special agent, rather than at the recommendation from the Service to the Justice Department. United States v. Lafko [75-2 USTC ¶9642], 520 F. 2d 622, 625 (1975). This misread our intent. Given the interrelated criminal/civil nature of tax fraud investigation whenever it remains within the jurisdiction of the Service, and given the utility of the summons to investigate civil tax liability, we decline to impose the prophylactic restraint on the summons authority and earlier than at the recommendation to the Department of Justice. We cannot deny that the potential for expanding the criminal discovery rights of the Justice Department or for usurping the role of the grand jury exists at the point of the recommendation by the special agent. But we think the possibilities for abuse of these policies are remote before the recommendation to Justice takes place and do not justify imposing an absolute ban on the use of the summons before that point. Earlier imposition of the ban, given the balance of policies and civil law enforcement interests, would unnecessarily hamstring the performance of the tax determination and collection functions by the Service.

¹⁶ See, e.g., United States v. Hodge & Zweig [77-1 USTC ¶9263], 548 F. 2d 1347, 1350, 1351 (CA 9 1977); United States v. Zack [75-2 USTC ¶9626], 521 F. 2d 1366, 1368 (CA 9 1975); United States v. Lafko [75-2 USTC ¶9642], 520 F. 2d 622, 625 (CA 3 1975); United States v. McCarthy [75-1 USTC ¶9402], 514 F. 2d 368, 374-375 (CA 3 1975); United States v. Theodore [73-1 USTC ¶9477], 479 F. 2d 749, 753 (CA 4) 1973); United States v. Weingarden [73-1 USTC ¶9210], 473 F. 2d 454, 459 (CA 6 1973); United States v. Wall Corp., 154 U. S. App. D. C. 309, 311 [73-1 USTC ¶9122], 475 F. 2d 893, 895 (1972).

¹⁷ We recognize, of course, that examination of agent motive may be necessary to evaluate the good-faith factors of Powell, for example, to consider whether a summons was issued to harass a taxpayer.

¹⁸ The dissent would abandon this aspects of the good-faith inquiry. It would permit the IRS to use the summons authority solely for criminal investigation. It reaches this conclusion because it says the Code contains no limitation to prevent such use. Its argument reveals a fundamental misunderstanding about the authority of the IRS. The Service does not enjoy inherent authority to summon production of the private papers of citizens. It may exercise only that authority granted by Congress. In §7602 Congress has bestowed upon the Service the authority to summon production for four purposes only: for "ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax . . . or collecting any such liability." Congress therefore intended the summons authority to be used to aid the determination and collection of taxes. These purposes do not include the goal of filing criminal charges against citizens. Consequently, summons authority does not exist to aid criminal investigations solely. The error of the dissent is that it seeks a limit on the face of the statute when it should seek an affirmative grant of summons authority for purely criminal investigations. We have made that search and could uncover nothing in the Code or its legislative history to suggest that Congress intended to permit exclusively criminal use of summonses. As a result, the IRS employs its authority in good faith when it pursues the four purposes of §7602, which do not include aiding criminal investigations solely.

¹⁹ To the limited extent that the institutional good faith of the Service with regard to criminal purpose may be questioned before any recommendation to the Department of Justice, our position on this issue necessarily rejects the Government's argument that prerecommendation enforcement of summonses must meet only the Powell elements of good faith. We have concluded that the Government's contention fails to recognize the essence of the good-faith inquiry. The Powell elements were not intended as an exclusive statement about the meaning of good faith. They were examples of agency action not in good-faith pursuit of the congressionally authorized purposes of §7602. The dispositive question in each case, then, is whether the Service is pursuing the authorized purposes in good faith.

²⁰ These requirements are not intended to be exclusive. Future cases may well reveal the need to prevent other forms of agency abuse of congressional authority and judicial process.

²¹ Respondents argue that the District Court made a factual finding when it concluded that the summonses were issued solely to gather evidence for a criminal prosecution. They then submit that the District Court's decision may be overturned only if this Court holds this finding to be clearly erroneous. Several Courts of Appeals have discussed the factual and legal issues that lurk in summons enforcement proceedings. Compare United States v. Zack, 521 F. 2d, at 1367-1368; United States v. National State Bank [72-1 USTC ¶9168], 454 F. 2d 1249, 1252 (CA7 1972); Boren v. Tucker [57-1 USTC ¶9246], 239 F. 2d 767, 773 (CA2 1956), with United States v. Weingarden, 473 F. 2d, at 460. Whether the issue of the Service's good faith generally poses a factual question, or a legal and factual one, or a legal question, is not necessarily presented in the case now before the Court, and we do not reach it. The lower courts employed an incorrect legal standard to measure good faith when they limited their consideration to the personal motivation of Special Agent Olivero. In this case, then, a legal error compels reversal.

Dissenting Opinion

MR. JUSTICE STEWART, with whom THE CHIEF JUSTICE REHNQUIST, and MR. JUSTICE STEVENS join, dissenting:

This case is here only because of judicial misreadings of a passage in the Court's opinion in Donaldson v. United States, 400 U. S. 517, at 533. That passage has been read by the federal courts, in this case and in others, to mean that a summons under §7602 of the Internal Revenue Code, 26 U. S. C. §7602, is improper if issued in aid of "an investigation solely for criminal purposes." ¹ Yet the statute itself contains no such limitation, and the Donaldson opinion in fact clearly stated that there are but two limits upon enforcement of such a summons: it must be "issued in good faith and prior to a recommendation for criminal prosecution." Id. , at 536. I adhere to that view.

The Court concedes that the task of establishing the "purpose" of an individual agent is "undesirable and unrewarding." Ante, at --. Yet the burden it imposes today--to discover the "institutional good faith" of the entire Internal Revenue Service--is, in my view, even less desirable and less rewarding. The elusiveness of "institutional good faith" as described by the Court can produce little but endless discovery proceedings and ultimate frustration of the fair admin istration of the Internal Revenue Code. In short, I fear that the Court's new criteria will prove wholly unworkable.

Earlier this year the Court of Appeals for the Second Circuit had occasion to deal with the issue now before us in the case of United States v. Morgan Guaranty Trust Co., 572 F. 2d 36. Judge Friendly's perceptive opinion for his court in that case read the Donaldson opinion correctly: This Court was there "laying down an objective test, 'prior to a recommendation for criminal prosecution,' that would avoid a need for determining the thought processes of special agents; and . . . the 'good faith' requirement of the holding related to such wholly different matters as those mentioned in" the case of United States v. Powell [64-2 USTC ¶9858], 379 U. S. 48. ² "Such a view would

¹ See ante, at p. -- n. 6.

² As Judge Friendly pointed out, this Court's Powell opinion simply declared that a court may not permit its process in enforcing a summons to be abused, and its examples of "abuse" were: "Such an abuse would take place if the summons had been issued for an improper purpose, such as to harass the taxpayer or to put pressure on him to settle a collateral dispute, or for any other purpose reflecting on the good faith of the particular investigation." 379 U. S., at 58.

"Nothing was said to indicate that an intention by the Commissioner to uncover criminal tax liability would reflect 'on the good faith' of the inquiry, and the rule of ejusdem generis would dictate the contrary." 572 F. 2d, at 40.#e . . . be consistent with the only rationale that has ever been offered for preventing an otherwise legitimate use of an Internal Revenue Service third party summons, namely that Congress could not have intended the statute to trench on the power of the grand jury or to broaden the Government's right to discovery in a criminal case. . . ." 572 F. 2d, at 41-42.

Instead of standing by the objective and comparatively bright-line test of Donaldson, as now clarified, the Court today further muddies the waters. It does not even attempt to identify the source of the requirements it now adds to enforcement proceedings under §§ 7402(b) and 7604(a) of the Code. These requirements are not suggested by anything in the statutes themselves, and nobody suggests that they derive from the Constitution. They are simply imposed by the Court from out of nowhere, and they seem to me unjustified, unworkable, and unwise.

I would reverse the judgment, not for further hearings in the District Court, but with instructions to order enforcement of the summons.

¹ Frequently, a revenue agent of the IRS Audit Division will refer a case on which he is working to the Intelligence Division for investigation of possible fraud. After such a referral, and at other times, the special agent and the revenue agent work together. Because of the importance and sensitivity of the criminal aspects of the joint investigation, the special agent assume control of the inquiry. See, e.g., Internal Revenue Manual, ch. 4500, ¶4563.431-4565.44 (1976 and 1978).

The Audit Division and the Intelligence Division have now been redesignated as the Examinations Division and the Criminal Enforcement Division, respectively. IRS News Release, Feb. 6, 1978.

² Respondents describe an Illinois land trust as follows:

"An Illinois land trust is a contract by which a trustee is vested with both legal and equitable title to real property and the interest of the beneficiary is considered personal property. Under this trust the beneficiary or any person designated in writing by the beneficiary has the exclusive power to direct or control the trustee in dealing with the title and the exclusive control of the management, operation, renting and selling of the trust property together with the exclusive right to the earnings, avails and proceeds of said property. Ill. Rev. Stat. ch. 29, §8.31 (1971)." Brief for Respondents 1-2, n. 1.

³ Section 7602 reads:

"For the purpose of ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax or the liability at law or in equity of any transferee or fiduciary of any person in respect of any internal revenue tax, or collecting any such liability, the Secretary or his delegate is authorized--

"(1) To examine any books, papers, records, or other data which may be relevant or material to such inquiry;

"(2) To summon the person liable for tax or required to perform the act, or any officer or employee of such person, or any person having possession, custody, or care of books of account containing entries relating to the business of the person liable for tax or required to perform the act, or any other person the Secretary or his delegate may deem proper, to appear before the Secretary or his delegate at a time and place named in the summons and to produce such books, papers, records, or other data, and to give such testimony, under oath, as may be relevant or material to such inquiry; and

"(3) To take such testimony of the person concerned, under oath, as may be relevant or material to such inquiry."

⁴ Section 7402(b) states:

"If any person is summoned under the internal revenue laws to appear, to testify, or to produce books, papers, or other data, the district court of the United States for the district in which such person resides or may be found shall have jurisdiction by appropriate process to compel such attendance, testimony, or production of books, papers, or other data."

Section 7604(a) reads:

"If any person is summoned under the internal revenue laws to appear, to testify, or to produce books, papers, records, or other data, the United States district court for the district in which such person resides or is found shall have jurisdiction by appropriate process to compel such attendance, testimony, or production of books, papers, records, or other data."

⁵ The District Court was aware of and recognized the Government's contention that the individual agent's motive in the investigation was not dispositive:

"THE COURT: . . . [U]nder your theory any criminal investigation would not really be one until they closed it because there was always a possibility of a civil liability.

* * *

"If that's the law, you're in trouble, Mr. Cushner [counsel for respondents].

* * *

"I think it boils down to an issue of law so it's the cases really that I'm interested in plus any further clues I may find in the in camera inspection of the investigative file." App. 61-62.

The Court agreed to inspect the IRS investigative file in camera after it refused to permit respondents to inspect the file. Id., at 50-51, 61-62.

⁶ Compare United States v. Hodge & Zweig [77-1 USTC ¶9263], 548 F. 2d 137, 1350-1351 (CA9 1977); United States v. Zack [75-2 USTC ¶9626], 521 F. 2d 1366, 1368 (CA9 1975); United States v. McCarthy [75-1 USTC ¶9402], 514 F. 2d 368, 374-375 (CA3 1975); United States v. Weingarden [73-1 USTC ¶9210], 473 F. 2d 454, 460 (CA6 1973); United States v. Wall Corp., 154 U. S. App. D. C. 309, 311, [73-1 USTC ¶9122] 475 F. 2d 893, 895 (1972); and United States v Billingsley [73-1 USTC ¶9117], 469 F. 2d 1208, 1210 (CA10 1972); with United States v. Morgan Guaranty Trust Co. [78-1 USTC ¶9235], -- F. 2d --, -- (CA2 1978); and United States v. Troupe, 438 F. 2d 117, 119 (CA8 1971), regarding the conflict about whether the recommendations for criminal prosecution is dispositive of the so-called criminal purpose issue.

Compare United States v. Hodge & Zweig, 548 F. 2d, at 1351; and United States v. Billingsley, 469 F. 2d, at 1210, with United States v. Lafko [75-2 USTC ¶9642], 520 F. 2d 622, 625 (CA3 1975), regarding the conflict about whether the criminal recommendation from the IRS to the Department of Justice or the recommendation from the special agent to his superiors is important in the enforcement inquiry.

⁷ In Boren v. Tucker, 239 F. 2d, at 772-773, the Ninth Circuit distinguished United States v. O'Connor [53-2 USTC ¶9591], 118 F. Supp. 248 (Mass. 1953), which involved an investigation of a taxpayer already under indictment.

⁸ The Court had concluded earlier that the summoning of the employer's and the accountant's records for an investigation of the taxpayer did not violate the constitutional rights of any of them. 400 U. S., at 522.

⁹ See §§ 3614, 3615, 3616, and 3654 of the 1939 Code, 53 Stat. 438-440, 446.

¹⁰ See United States v. Kordel, 397 U. S. 1, 11 (1970) (Federal Food, Drug, and Cosmetic Act enforcement), citing Standard Sanitary Mfg. Co. v. United States, 226 U. S. 20, 51-52 (1912) (Sherman Act enforcement).

¹¹ See Part II-B and n. 15, infra.

¹² The interrelated nature of the civil and criminal investigative functions is further demonstrated by the organization and functioning of the Internal Revenue Service. Pursuant to 26 CFR §601.107 (1977), each revenue district has an Intelligence Division, "whose mission is to encourage and achieve the highest possible degree of voluntary compliance with the internal revenue laws." This purpose is implemented by "the investigation of possible criminal violations of such laws and the recommendation (when warranted) of prosecution and/or assertion of the 50 percent ad valorem addition to the tax." Ibid. See generally Internal Revenue Service Organization and Functions §§ 1113.563, 1114.8, and 1118.6, 39 Fed. Reg. 11572, 11581, 11601, and 11607 (1974).

In its Manual for employees, the IRS instructs that the jurisdiction of the Intelligence Division includes all civil penalties except those related to the estimated income tax. Internal Revenue Manual, ch. 4500, ¶4561 (1976). The Manual adds:

"Intelligence features are those activities of developing and presenting admissible evidence required to prove criminal violations and the ad valorem penalties for civil fraud, negligence and delinquency (except those concerning tax estimations) for all years involved in cases jointly investigated to completion." Id., ¶4565.31(4) (1976).

The Manual also contains detailed instructions for coordination between special agents and revenue agents during investigations of tax fraud, E.g., id., ¶4563.431 (1978), and ¶4565.22, 4565.32, 4565.41-4565.44 (1976).

Statistics for the fiscal year 1976 show that the Intelligence Division has a substantially greater involvement with civil fraud than with criminal fraud. Of 8,797 full-scale tax fraud investigations in that year, only 2,037 resulted in recommendations for prosecution. The 6,760 cases not recommended involved approximately $11 million in deficiencies and penalties. See 1976 Annual Report of the Commissioner of Internal Revenue 33, 61, 152.

¹³ See H. R. Rep. No. 1337, 83d Cong., 2d Sess., A436 (1954); S. Rep. No. 1622, 83d Cong., 2d Sess., 617 (1954).

¹⁴ Internal Revenue officials received similar summons authority in revenue acts prior to the 1939 Code. See, e.g., Revenue Act of 1918, §1305, 40 Stat. 1142; Tariff Act of Oct. 3, 1913, §II ¶I, 38 Stat. 178-179; Act of June 30, 1864, §14, 13 Stat. 226.

The interrelated nature of fraud investigations thus was apparent as early as 1864. Section 14 of the 1864 Act permitted the issuance of a summons to investigate a suspected fraudulent return. It also prescribed a 100% increase in valuation as a civil penalty for falsehood. Section 15 established the criminal penalties for such conduct. Four years later, when Congress created the position of district supervisor, that official received similar summons authority. Act of July 20, 1868, §49, 15 Stat. 144-145; see Cong. Globe, 40th Cong., 2d Sess., 3450 (1868). The federal courts enforced these summonses when they were issued in good faith and in compliance with instructions from the Commissioner. See In re Meador, 16 F. Cas. 1294, 1296 (ND Ga. 1869); Stanwood v. Green, 22 F. Cas. 1077, 1079 (ND Miss. 1870) ("it being understood that this right upon the part of the supervisor extends only to such books and papers as relate to their banking operations, and are connected with the internal revenue of the United States").

¹⁵ The Third Circuit has suggested that our reference in Donaldson to the recommendation for criminal prosecution ("We hold that under §7602 an internal revenue summons may be issued in aid of an investigation if it is issued in good faith and prior to a recommendation for criminal prosecution," 400 U. S., at 536) intended to draw a line at the recommendation to the Service's district office from the special agent, rather than at the recommendation from the Service to the Justice Department. United States v. Lafko [75-2 USTC ¶9642], 520 F. 2d 622, 625 (1975). This misread our intent. Given the interrelated criminal/civil nature of tax fraud investigation whenever it remains within the jurisdiction of the Service, and given the utility of the summons to investigate civil tax liability, we decline to impose the prophylactic restraint on the summons authority and earlier than at the recommendation to the Department of Justice. We cannot deny that the potential for expanding the criminal discovery rights of the Justice Department or for usurping the role of the grand jury exists at the point of the recommendation by the special agent. But we think the possibilities for abuse of these policies are remote before the recommendation to Justice takes place and do not justify imposing an absolute ban on the use of the summons before that point. Earlier imposition of the ban, given the balance of policies and civil law enforcement interests, would unnecessarily hamstring the performance of the tax determination and collection functions by the Service.

¹⁶ See, e.g., United States v. Hodge & Zweig [77-1 USTC ¶9263], 548 F. 2d 1347, 1350, 1351 (CA 9 1977); United States v. Zack [75-2 USTC ¶9626], 521 F. 2d 1366, 1368 (CA 9 1975); United States v. Lafko [75-2 USTC ¶9642], 520 F. 2d 622, 625 (CA 3 1975); United States v. McCarthy [75-1 USTC ¶9402], 514 F. 2d 368, 374-375 (CA 3 1975); United States v. Theodore [73-1 USTC ¶9477], 479 F. 2d 749, 753 (CA 4) 1973); United States v. Weingarden [73-1 USTC ¶9210], 473 F. 2d 454, 459 (CA 6 1973); United States v. Wall Corp., 154 U. S. App. D. C. 309, 311 [73-1 USTC ¶9122], 475 F. 2d 893, 895 (1972).

¹⁷ We recognize, of course, that examination of agent motive may be necessary to evaluate the good-faith factors of Powell, for example, to consider whether a summons was issued to harass a taxpayer.

¹⁸ The dissent would abandon this aspects of the good-faith inquiry. It would permit the IRS to use the summons authority solely for criminal investigation. It reaches this conclusion because it says the Code contains no limitation to prevent such use. Its argument reveals a fundamental misunderstanding about the authority of the IRS. The Service does not enjoy inherent authority to summon production of the private papers of citizens. It may exercise only that authority granted by Congress. In §7602 Congress has bestowed upon the Service the authority to summon production for four purposes only: for "ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax . . . or collecting any such liability." Congress therefore intended the summons authority to be used to aid the determination and collection of taxes. These purposes do not include the goal of filing criminal charges against citizens. Consequently, summons authority does not exist to aid criminal investigations solely. The error of the dissent is that it seeks a limit on the face of the statute when it should seek an affirmative grant of summons authority for purely criminal investigations. We have made that search and could uncover nothing in the Code or its legislative history to suggest that Congress intended to permit exclusively criminal use of summonses. As a result, the IRS employs its authority in good faith when it pursues the four purposes of §7602, which do not include aiding criminal investigations solely.

¹⁹ To the limited extent that the institutional good faith of the Service with regard to criminal purpose may be questioned before any recommendation to the Department of Justice, our position on this issue necessarily rejects the Government's argument that prerecommendation enforcement of summonses must meet only the Powell elements of good faith. We have concluded that the Government's contention fails to recognize the essence of the good-faith inquiry. The Powell elements were not intended as an exclusive statement about the meaning of good faith. They were examples of agency action not in good-faith pursuit of the congressionally authorized purposes of §7602. The dispositive question in each case, then, is whether the Service is pursuing the authorized purposes in good faith.

²⁰ These requirements are not intended to be exclusive. Future cases may well reveal the need to prevent other forms of agency abuse of congressional authority and judicial process.

²¹ Respondents argue that the District Court made a factual finding when it concluded that the summonses were issued solely to gather evidence for a criminal prosecution. They then submit that the District Court's decision may be overturned only if this Court holds this finding to be clearly erroneous. Several Courts of Appeals have discussed the factual and legal issues that lurk in summons enforcement proceedings. Compare United States v. Zack, 521 F. 2d, at 1367-1368; United States v. National State Bank [72-1 USTC ¶9168], 454 F. 2d 1249, 1252 (CA7 1972); Boren v. Tucker [57-1 USTC ¶9246], 239 F. 2d 767, 773 (CA2 1956), with United States v. Weingarden, 473 F. 2d, at 460. Whether the issue of the Service's good faith generally poses a factual question, or a legal and factual one, or a legal question, is not necessarily presented in the case now before the Court, and we do not reach it. The lower courts employed an incorrect legal standard to measure good faith when they limited their consideration to the personal motivation of Special Agent Olivero. In this case, then, a legal error compels reversal.

 

 

[79-1 USTC ¶9290]United States of America, Plaintiff-Appellee v. James Travis Buckley, Defendant-Appellant

(CA-5), U. S. Court of Appeals, 5th Circuit, No. 77-5449, 586 F2d 498, 12/18/78, Affirming and remanding unreported District Court

[Code Secs. 7201 and 7203]

Evasion of tax: Evidence: Entrapment.--Where the evidence failed to show that any law enforcement officer induced the defendant to fail to file a federal income tax return, or that a criminal design originated with government officials who implanted in his mind the disposition to commit the offense, the defendant was not entitled to an entrapment instruction.

Evasion of tax: Evidence: Attorney-client privilege.--The invocation of the attorney client privilege with respect to testimony properly within its scope is not conditioned upon the motive of the litigant asserting it.

Evasion of tax: Sixth amendment right to confront witness: Evidence: Attorney-client privilege.--Defendant's Sixth Amendment right to confront the witnesses against him was not compromised by the assertion of the attorney-client privilege where the testimony sought to be elicited had been otherwise available to him and he, therefore, had not been prejudiced.

Evasion of tax: Sentences: Lesser included offenses.--Where one of the affirmative acts relied upon by the government in obtaining defendant's conviction for attempted income tax evasion was his failure to file an income tax return, conviction and sentencing on the latter cannot stand as it is a lesser offense included in the evasion conviction.

Evidence: Motion to discover.--Failure to order discovery of F. B. I. files against defendant was not reversible error, where after an in camera inspection both the trial court and the prosecution concluded that the files contained no exculpatory material.

Rob ert E. Hauberg, United States Attorney, Jackson, Miss. 39205, M. Carr Ferguson, Assistant Attorney General, Gilbert E. Andrews, Rob ert E. Lindsay, Charles E. Brookhart, Mary L. Jennings, Department of Justice, Washington, D. C. 20530, for plaintiff-appellee. Travis Buckley, P. O. Box 52, Laurel, Miss. 39440, pro se, C. Everette Boutwell, P. O. Box 461, Laurel, Miss. 39440, for defendant-appellant.

Before RONEY, TJOFLAT and HILL, Circuit Judges.

HILL, Circuit Judge:

Appellant James Travis Buckley, an attorney, was charged in an eight-count indictment with violating two sections of the Internal Revenue Code of 1954. The indictment charged Buckley with three counts of attempted tax evasion under 26 U. S. C. A. §7201 and five counts for failure to file a return under 26 U. S. C. A. §7203, all allegedly occurring during a five-year period from 1970 through 1974. Following a six-day trial in the United States District Court for the Southern District of Mississippi, the jury, after two hours of deliberation, returned a verdict of guilty on each of the right counts of the indictment. On appeal Buckley challenges, inter alia, the validity of his convictions for failure to file in the years in which he was also convicted for attempted tax evasion. Because we agree with the appellant on this point, we modify the decision below by vacating the convictions and sentences for failure to file in 1970, 1973 and 1974; otherwise, we affirm.

I. Entrapment

Buckley raised an "entrapment" defense at trial consisting of testimony by him and his friends to the effect that the F. B. I. was engaged in a plot to see him "behind bars." Buckley asserted that he had incurred the ire of the F. B. I. by representing several of the criminal defendants in a trial arising out of the fire bombing death of Vernon Dahmer, the Hattiesburg, Mississippi, civil rights leader, and by his representation of numerous other defendants in cases where he had had occasion to cross-examine F. B. I. agents. Appellant's friends testified that they had overheard remrks made by F. B. I. agents to Buckley stating that "we will get you one way or the other." Buckley himself testified that an I. R. S. agent had visited him in 1966 in connection with an audit of his return and warned him that the F. B. I. was "out to get him" regardless of whether he filed or not. Numerous acts of harassment were also alleged. As a result of his conversation with the I. R. S. agent and his experiences with the F. B. I., Buckley testified that he failed to file income tax returns because he was afraid that if he were to file he would be indicted with fabricated charges of filing fraudulent returns, a felony. ¹ Choosing the lesser of two evils, then, he elected not to file, knowing it to be punishable only as a misdemeanor. Arguing that the above evidence was sufficient to raise the issue of entrapment, appellant now contends that the trial court erred in refusing to instruct the jury on the defense of entrapment.

Appellant is certainly correct in asserting that the issue of entrapment is for the jury to decide, assuming it is properly raised. United States v. Benavidez, 558 F. 2d 308, 310 (5th Cir. 1977); United States v. Harrell, 436 F.2d 606, 612 (5th Cir. 1970); Pierce v. United States, 414 F. 2d 163 (5th Cir.), cert. denied, 396 U. S. 960, 90 S. Ct. 435, 24 L. Ed. 2d 425 (1969). Nonetheless, in order to raise the issue, the initial burden of going forward with the evidence lies with the defendant; he must produce "some evidence, but more than a scintilla," raising the defense. United States v. Groessel, 440 F. 2d 602, 606 (5th Cir.), cert. denied, 403 U. S. 933, 91 S. Ct. 2263, 29 L. Ed. 2d 713 (1971). See also United States v. Benavidez, 558 F. 2d 308 (5th Cir. 1977); United States v. Harper, 505 F. 2d 924 (5th Cir. 1974). Once the defendant has discharged this obligation, the prosecution must ultimately prove beyond a reasonable doubt that the defendant was not entrapped into committing the offense. United States v. Benavidez, 558 F. 2d 308, 310 (5th Cir. 1977); United States v. Harrell, 436 F. 2d 606, 612 (5th Cir. 1970). If the defendant fails to carry his burden of going forward with the evidence, however, he is not entitled to have the jury consider the defense of entrapment. United States v. Harper, 505 F. 2d 924, 926 (5th Cir. 1974); United States v. Groessel, 440 F. 2d 602, 606 (5th Cir.), cert. denied, 403 U. S. 933, 91 S. Ct. 2263, 29 L. Ed. 2d 713 (1971).

Entrapment occurs "when the criminal design originates with the officials of the government, and they implant in the mind of an innocent person the disposition to commit the alleged offense and induce its commission in order that they may prosecute." Sorrells v. United States, 287 U. S. 435, 442, 53 S. Ct. 210, 213, 77 L. Ed. 413 (1932). See also United Stastes v. Russell, 411 U. S. 423, 434-35, 93 S. Ct. 1637, 36 L. Ed. 2d 366 (1973); Sherman v. United States, 356 U. S. 369, 372, 78 S. Ct. 819, 2 L. Ed. 2d 848 (1958); United States v. Costello, 483 F. 2d 1366, 1367 (5th Cir. 1973); United States v. Groessel, 440 F. 2d 602, 605 (5th Cir.), cert. denied, 403 U. S. 933, 91 S. Ct. 2263, 29 L. Ed. 2d 713 (1971). Although Buckley's story was vigorously denied by the government at trial, ² we nonetheless accept it as true for the purposes of deciding this issue. And even assuming Buckley's allegations to be true, the evidence does not raise the defense of entrapment.

It is clear from the evidence that the criminal intent did not originate with the government, but instead formed within the defendant's own mind, in response to an alleged plot by the F. B. I. to see him incarcerated. As Buckley testified:

In 1966 in my office in Bay Springs, Mississippi an agent of the Internal Revenue visited me and audited my books and papers and accounts and then later came to my house . . . I don't know the man's name and I don't know if I knew it then, but there were actually two different ones visited me at different time[s], but one of them told me then and told me at my home later, said, that the Federal Bureau of Investigation is after you and he gave me this and told me it was a friendly advice and a friendly warning, he said, 'they will get you one way or the other and I am telling you this as a matter of trying to help you and trying to advise you to be on the alert.' And he said, 'I know them well enough to know that it does not make any difference whether you file or not, if they can get you.' but he said, 'I'm not telling you not to file and I'm not telling you to file, but you know the penalties for not filing," and he said, 'I'm under an obligation to advise you that the law requires that you file.'

As the testimony thus shows, there was no attempt by any law enforcement official to induce or entreat Buckley to commit the offenses for which he was charged; rather, the decision not to file returns for the years 1970 through 1974 was one conceived entirely by Buckley himself, in response to an alleged threat by the F. B. I. Whether that threat is real or fancied is immaterial to our decision here. The course of action pursued by Buckley was the result of a voluntary and informed decision to violate the law, a far cry from the genuine entrapment situation where an otherwise innocent and law abiding citizne falls prey to government seduction and is persuaded to commit a crime. If Buckley truly believed the F. B. I. was "out to get him," then he should have scrupulously obeyed the law, remaining confident that he would be cleared of any contrived charges. Because the evidence presented by Buckley failed to raise the defense of entrapment, it was not error for the trial judge to refuse to charge on entrapment.

II. Attorney-Client Privilege

Buckley next asserts that it was error to allow prosecution witness Castle to invoke the attorney-client privilege and prevent his three attorneys from testifying. Richard Castle had been a close friend of Buckley's during the years in question and supplied very damaging testimony enumerating the various affirmative acts of evasion practiced by Buckley. In an effort to impeach Castle's credibility, Buckley sought to call to testify three attorneys who represented Castle in a civil action brought by Buckley to collect attorney's fees. Buckley had represented Castle in a personal injury suit in which a $100,000 settlement had been procured, but the two were unable to agree on Buckley's fee, so Buckley brought an action to recover his portion of the settlement. By way of offer of proof, Buckley disclosed that he intended to show that Castle was biased against him because of their disagreement over the amount of the fee; furthermore, Buckley wished to prove that Castle had lied to his attorneys about the settlement offer he had originally received in the personal injury case before he retained Buckley. Castle invoked the privilege and prevented his attorneys from testifying, asserting that it would be inconvenient for them to have to do so.

Appellant concedes that the testimony sought to be elicited from Castle's attorneys was properly within the scope of the attorney-client privilege. Nonetheless, he argues that the privilege may not be invoked solely for reasons of convenience, but must be invoked out of a concern for confidentiality.

While appellant's argument may have some superficial appeal, it fails to appreciate the pragmatic considerations underlying the implementation of the policy behind the attorney-client privilege, which is to encourage the free-flowing communication and candid disclosure so vitally necessary to effective representation by counsel. This policy cannot be achieved unless a client is free to communicate with his attorney without fear of consequences or the apprehension of disclosure." Modern Woodmen of America v. Watkins, 132 F. 2d 352, 354 (5th Cir. 1942). See Fisher v. United States [76-1 USTC ¶9353], 425 U. S. 391, 403, 96 S. Ct. 1569, 48 L. Ed. 2d 39 (1976); Baird v. Koerner [60-2 USTC ¶9527], 279 F. 2d 623, 629 (9th Cir. 1960); Schwimmer v. United States [56-2 USTC ¶9712], 232 F. 2d 855, 863 (8th Cir. 1956); 8 Wigmore on Evidence §2291 (McNaughton rev. 1961). To condition the invocation of the privilege upon a showing that it was claimed out of considerations of confidentiality would subject a client to fear of subsequent disclosure and cause him to question the wisdom of telling all to his attorney. Doubting his ability to prove subsequently that the present confidence entrusted in his attorney is prompted by the assurance that he can later claim the privilege, a client might hesitate to be completely open with his attorney and the policy behind the privilege would be frustrated. Just as we do not question the motives of a litigant who wishes to invoke an exclusionary rule of evidence, we should likewise not question the motives of a client who wishes to invoke the privilege. Predicating the invocation of the privilege upon a showing of "good faith" or "proper motive" would remove the protective shield of the privilege, and it would cease to act as an inducement to frank and unrestricted communications between attorney and client.

Appellant further contends that Castle's claim of the privilege denied him his Sixth Amendment right to confront witnesses against him and have compulsory process run in his favor. As we have recognized above, there is a valid interest to be served by the existence of the attorney-client privilege. Buckley suggests, however, that the policy behind the privilege is subordinate to his Sixth Amendment rights in this case. Davis v. Alaska, 415 U. S. 308, 94 S. Ct. 1105, 39 L. Ed 2d 347 (1974), relied upon by appellant, does stand for the proposition that the Sixth Amendment rights of a criminal defendant may, in some instances, be paramount to certain governmental interests. In Davis, for example, the state's interest in protecting juvenile offenders, implemented by an evidentiary rule prohibiting the disclosure of their court records in subsequent judicial proceedings, was outweighed by the defendant's right to cross-examine a prosecution witness effectively. Similarly, other decisions by the Supreme Court have resolved the conflict between the Sixth Amendment and various governmental interests in favor of the defendant's Sixth Amendment rights. See, e.g., Chambers v. Mississippi, 410 U. S. 284, 93 St. Ct. 1038, 35 L. Ed. 2d 297 (1973); United States v. Nixon, 418 U. S. 683 (1974).

We need not reach this issue, however, because even assuming arguendo that appellant's Sixth Amendment rights were infringed, we find on the basis of this record that Buckley has suffered no prejudice. Buckley asserts that his Sixth Amendment rights were violated when he was prevented from questioning Castle and his three attorneys on matters within the scope of the privilege. Buckley wished to prove that Castle was biased against him because of their disagreement over the amount of the fee owed by Castle to Buckley and that Castle had lied on his attorneys about the amount of the settlement offer he had received in the personal injury case before he retained Buckley. A review of the record reveals that Buckley was able to place this very same evidence before the jury. Castle himself readily admitted on cross-examination that he had disagreed with Buckley over the amount of his fee. In addition, Judge George D. Grubbs, who presided over the pre-trial proceedings in Buckley's state court suit against Castle for the fee, freely testified that Castle had lied to his attorneys concerning the amount of the settlement offered to him. With the essence of the desired testimony before the jury, it is obvious that Buckley was in no way prejudiced by the invocation of the privilege. See United States v. Ashley, 555 F. 2d 462, 465 (5th Cir. 1977).

III. Sufficiency of the Evidence

Buckley challenges the sufficiency of the evidence to support his convictions under both Section 7201 and Section 7203. To sustain a conviction under Section 7201 the government must prove the existence of a tax deficiency, an affirmative act constituting an evasion or attempted evasion of the tax, and willfulness. Sansone v. United States [65-1 USTC ¶9307], 380 U. S. 343, 85 S. Ct. 1004, 13 L. Ed. 2d 882 (1965); Spies v. United States [43-1 USTC ¶9243], 317 U. S. 492, 63 S. Ct. 364, 87 L. Ed. 418 (1943). The elements of an offense under Section 7203 involve proof of failure to file and willfulness in doing so. Sansone v. United States [65-1 USTC ¶9307], 380 U. S. 343, 85 S. Ct. 1004, 13 L. Ed. 2d 882 (1965). Willfulness, within the meaning of both sections, is simply the "intentional violation of a known legal duty." United States v. Pomponio [76-2 USTC ¶9695], 429 U. S. 10, 12, 97 S. Ct. 22, 23, 50 L. Ed. 2d 12 (1976) (per curiam). In reviewing the evidence presented at trial, we must view it in a light most favorable to the government, for we do not have the license to weigh the evidence or assess the credibility of witnesses. Glasser v. United States, 315 U. S. 60, 62 S. Ct. 457, 86 L. Ed. 680 (1942); United States v. Burrell [75-1 USTC ¶9152], 505 F. 2d 904, 907 (5th Cir. 1974). To reverse a conviction on the ground of insufficient evidence we must find that "a reasonably minded jury must have [had] a reasonable doubt as to the existence of any of the essential elements of the crime charged." United States v. Stephenson, 474 F. 2d 1353, 1355 (5th Cir. 1973). We fail to reach such a conclusion, and from our review of the record, find the evidence more than sufficient.

IV. Validity of the Section 7203 Convictions

Buckley was convicted for attempted evasion of taxes (Section 7201) in 1970, 1973 and 1974. He was convicted for failure to file (Section 7203) in these same years, as well as in 1971 and 1972. As shown by the diagram below, upon the Section 7201 convictions for 1973 and 1974, concurrent one-year prison terms were imposed; for the Section 7203 convictions for 1970, 1971 and 1973, concurrent six-month prison terms were imposed to run consecutively to the one-year terms; finally, Buckley received concurrent suspended sentences for the Section 7201 count in 1970 and the Section 7203 counts in 1972 and 1974, but with concurrent one-year probation terms to be served upon release from prison.

                       1970               1971              1972               1973              1974

               suspended

               sentence

               with

§7201         Probation                                               one year           one year

                                                     sentence                             sentence

                                                     suspended                            suspended

                                                     with                                 with

§7203         six months         six months         probation         six months         probation

 

Appellant argues, and we agree, that failure to file is a lesser offense included in a Section 7201 conviction based on the facts of this case. The government conceded as much at oral argument. ³ Where one of the affirmative acts of evasion relied upon by the government in proving attempted tax evasion under Section 7201 is the failure to file an income tax return, failure to file is a lesser included offense, and Congress did not intend for the defendant to be punished for both offenses. United States v. Newman, 468 F. 2d 791, 796 (5th Cir. 1972), cert. denied, 411 U. S. 905, 93 S. Ct. 1527, 36 L. Ed. 2d 194 (1973).

Although the government concedes that punishment may not be imposed under both statutes, it nonetheless argues that the convictions for failure to file should stand for the years 1970, 1973 and 1974, reasoning that a conviction without a sentence imposed thereupon is harmless. ⁴ We disagree. Where one offense is included in another, it cannot support a separate conviction and sentence. Jeffers v. United States, 432 U. S. 137, 97 S. Ct. 2207, 53 L. Ed. 2d 168 (1977); Brown v. Ohio, 432 U. S. 161, 97 S. Ct. 2221, 53 L. Ed. 2d 187 (1977); United States v. York, 578 F. 2d 1036, 1040 (5th Cir. 1978). Thus, in situations such as the present one, where a defendant is improperly convicted for a lesser included offense, the proper remedy is to vacate both the conviction and sentence on the included offense, leaving the conviction and sentence on the greater offense intact. United States v. Slutsky, 487 F. 2d 842, 845-46 n. 18 (2d Cir. 1973), cert. denied, 416 U. S. 937, 94 S. Ct. 1937, 40 L. Ed. 2d 287 (1974); United States v. Rosenthal, 454 F. 2d 1252, 1255-56 n. 2 (2d Cir.), cert. denied, 406 U. S. 931, 92 S. Ct. 1801, 32 L. Ed. 2d 134 (1972); United States v. Newman [72-2 USTC ¶9719], 468 F. 2d 791, 796 (5th Cir. 1972), cert. denied, 411 U. S. 905, 93 S. Ct. 1527, 36 L. Ed. 2d 194 (1973).

The government emphasizes that in Jeffers the conviction on the lesser included offense was allowed to stand, ⁵ 432 U. S. at 148, 97 S. Ct. 2207, and urges a similar result here. We find the government's reliance on Jeffers to be misplaced. In Jeffers the Court dealt with the contention by the defendant that 21 U. S. C. §846, prohibiting conspiracies to commit drug-related offenses, was a lesser included offense of 21 U. S. C. §848, which prohibits conducting a continuing criminal enterprise to violate the drug laws. Arguing that the two offenses were the same for double jeopardy purposes, Jeffers maintained that his trial and conviction for violating 21 U. S. C. §848, occurring subsequent to his conviction under 21 U. S. C. §846, was invalid because it placed him twice in jeopardy for the same offense in contravention of the Double Jeopardy Clause of the Fifth Amendment. Assuming arguendo that Section 846 was a lesser included offense, the Court nonetheless concluded that Jeffers had waived his double jeopardy rights by persuading the trial court to order separate trials and by failing to raise any double jeopardy objections at the time. Having concluded that Jeffers could not object to being separately tried and convicted for the two offenses, the Court then turned to the question of whether Congress had intended to allow cumulative punishment for those defendants whose conduct violates both statutes. The Court concluded that Congress did not so intend, and accordingly reduced the fines given Jeffers to the maximum amount allowable under Section 848.

In contrast, we deal here with two offenses, one of which is admittedly included within the other, and a defendant who is neither responsible for his multiple convictions nor has exhibited any conduct resembling a waiver of his rights. Jeffers could not be heard to complain of successive prosecutions because he had in fact caused them; Buckley, on the other hand, has done nothing to estop him from complaining of his multiple convictions. Jeffers turned on a finding of waiver; we find no waiver in this case.

Therefore, we modify the judgment below by vacating the convictions and sentences for failure to file (counts two, six and eight) in the years 1970, 1973 and 1974. Because it is obvious that the convictions on the Section 7203 counts did not lead the trial court to impose a harsher sentence on the Section 7201 counts than he would have in the absence of such convictions, there is no need to remand for resentencing. See United States v. Slutsky [73-1 USTC ¶9447], 487 F. 2d 832, 845-46 n. 18 (2d Cir. 1973), cert. denied, 416 U. S. 937, 94 S. Ct. 1937, 40 L. Ed. 2d 287 (1974); United States v. Rosenthal [72-1 USTC ¶9205], 454 F. 2d 1252, 1256 (2d Cir.), cert. denied 406 U. S. 931, 92 S. Ct. 1801, 32 L. Ed. 2d 134 (1972).

V. Disclosure of the F. B. I. Files

As a final point of error, Buckley argues that the trial court committed reversible error by refusing to order discovery of the F. B. I. investigative files concerning him. Buckley contends that he is entitled to discovery by virtue of the Supreme Court's decision in Brady v. Maryland, 373 U. S. 83, 83 S. Ct. 1194, 10 L. Ed. 2d 215 (1963), in which the Court held that the suppression of exculpatory evidence by the prosecution in response to the request of an accused violates due process whenever that evidence is material to either guilt or punishment. In response to Buckley's motion for the discovery of these materials, the trial judge ordered the F. B. I. to submit the files to the prosecution for review and to the court for an in camera inspection. Both the prosecution and the trial court concluded that the files contained no exculpatory materials within the meaning of Brady. Having examined these files, sealed by the district court for possible review on appeal, we agree. Requiring materials sought for discovery to be submitted to the court for an in camera inspection is a practice which is both reasonable and protective of the defendant's rights, and, we might add, one which has received a measure of approval by the Supreme Court. See United States v. Agurs, 427 U. S. 97, 106, 96 S. Ct. 2392, 49 L. Ed. 2d 342 (1976). Moreover, in areas where, as in the present case, the request involves materials the disclosure of which is arguably not in the public interest, ⁶ this Court has sanctioned the use of in camera inspections to resolve the conflicting demands of the defendant and the government. United States v. Brown, 539 F. 2d 467,470 (5th Cir. 1976); see also United States v. Johnson [78-2 USTC ¶9642], 577 F. 2d 1304, 1309-10 (5th Cir. 1978). Thus, we conclude that Buckley's rights were adequately protected by the procedure employed by the district court and we concur in its conclusion that the F. B. I. files contain no information that would have been helpful to Buckley's defense.

Buckley also contends that there are two independent statutory provisions which entitle him to the requested information "as a matter of law." The first of these, Fed. R. Crim. P. 16(a)(1)(C), conditions the disclosure of information upon a showing by the defendant that the documents sought are "material to the preparation of his defense." Contrary to Buckley's assertion that Rule 16(a)(1)(C) "mandate[s] the production of such documents upon request," it is incumbent upon a defendant to make a prima facie showing of "materiality" in order to obtain discovery:

Materiality means more than that the evidence in question bears some abstract logical relationship to the issues in the case. . . . There must be some indication that the pretrial disclosure of the disputed evidence would have enabled the defendant significantly to alter the quantum of proof in his favor.

United States v. Ross [75-1 USTC ¶9428], 511 F. 2d 757, 762-63 (5th Cir.), cert. denied, 423 U. S. 836, 96 S. Ct. 62, 46 L. Ed. 2d 54 (1975).

Buckley has made no such showing here. Alternatively, even if we were to assume that a showing of materiality had been made, the information sought, by Buckley's own admission, related only to his entrapment defense, which, as we have already decided, was not a "defense" in this case.

Similarly, Buckley's reliance on the disclosure provisions of the Freedom of Information Act (FOIA), 5 U. S. C. A. §552(a), ⁷ does not support his claim of entitlement to the files. Although the FOIA provides an independent basis for obtaining information potentially useful in a criminal trial, it "was not intended as a device to delay ongoing litigation or to enlarge the scope of discovery beyond that already provided by the Federal Rules of Criminal Procedure." United States v. Murdock [77-1 USTC ¶9289], 548 F. 2d 599, 602 (5th Cir. 1977).

VI. Conclusion

We affirm the judgment of the district court but modify it by vacating the convictions and sentences for failure to file in 1970, 1973 and 1974 (counts two, six and eight).

AFFIRMED in part; MODIFIED in part.

¹ Although Buckley's testimony relating to his entrapment defense at trial consisted solely of his statement that he was "afraid" to file a return, the reasonable inference to be drawn from that testimony and the arguments in his brief is that he did not file during the years in question because he was afraid that the F. B. I. would fabricate information to charge him with filing fraudulent returns, should he choose to file.

² The government adduced evidence at trial indicating that Buckley's returns were never audited in 1966, thus casting doubt on his assertion that he was visited by an Internal Revenue Agent. The government also presented evidence to the effect that the F. B. I. had forwarded information concerning Buckley to Internal Revenue simply as a routine part of their investigation into a threat on Richard Castle's life. The F. B. I. claimed that this was the only connection that they had had with the Buckley case.

³ Two of the contentions made by the government in their brief were abandoned at oral argument: first, the government conceded that probation was "punishment" for the purposes of the Double Jeopardy Clause's protection against multiple punishments for the same offense; second, the government conceded that they had misapplied the test of Blockburger v. United States, 284 U. S. 299, 52 S. Ct. 180, 76 L. Ed. 306 (1932), for determining whether two offenses were the "same" for double jeopardy purposes, and therefore, that failure to file was a lesser included offense of attempted tax evasion on the facts of this case.

⁴ The very fact that the government strenuously calls for retention of the conviction belies their assertion that it is "harmless."

⁵ In Jeffers v. United States, 432 U. S. 137, 155 n. 25, 97 S. Ct. 2207, 53 L. Ed. 2d 168 (1977), the Court pointed to United States v. Gaddis, 424 U. S. 544, 549 n. 12, 96 S. Ct. 1023, 47 L. Ed. 2d 222 (1976), as involving a situation where both the conviction and sentence on the lesser included offense were vacated.

⁶ Aside from the obvious security risks created by the disclosure of the F. B. I. files, such information is also exempted from disclosure by the Freedom of Information Act. 5 U. S. C. A. §552(b)(7).

⁷ The F. B. I. files were the subject of a separate civil action brought by Buckley prior to trial under the Freedom of Information Act.

 

 

[77-1 USTC ¶9289]United States of America, Plaintiff-Appellee v. Church E. Murdock, Jr., Defendant-Appellant

(CA-5), U. S. Court of Appeals, 5th Circuit, No. 76-1435, Summary Calendar ^*, 548 F2d 599, 3/11/77

[Code Sec. 7203--result unchanged by '76 Tax Reform Act]

Crimes: Failure to file returns: Defenses: Assertion of error at trial.--The Fifth Circuit Court of Appeals affirmed the taxpayer's conviction for willfully failing to file income tax returns for several years. The appellate court found that the trial judge had not erred in withholding certain government documents from the taxpayer which the taxpayer contended could have sustained a motion to quash his indictment on the grounds of selective and discriminatory prosecution. Since the taxpayer could not show that he had been the victim of a discriminatory prosecution, he was not entitled to the discovery of material allegedly related to this defense under either the discovery rules of the Federal Rules of Criminal Procedure or the Freedom of Information Act.

Church E. Murdock, Jr., 1710 Center St., Mobile Ala. 36604, pro se. Wayman G. Sherrer, United States Attorney, Melton L. Alexander, Assistant United States Attorney, Birmingham, Ala. 35203, Scott P. Crampton, Assistant Attorney General, Gilbert E. Andrews, Rob ert E. Lindsay, Wynette, J. Hewett, Department of Justice, Washington, D. C. 20530, for defendant-appellant.

Before AINSWORTH, CLARK and RONEY, Circuit Judges.

RONEY, Circuit Judge:

Dr. Church E. Murdock appeals his conviction for willfully failing to file federal income tax returns for three years. The sole issue presented by Murdock's brief is this: "whether the trial judge erred by withholding documents from defendant in evidentiary hearing which could have sustained his motion to quash indictment on grounds of selective and discriminatory prosecution." Finding no error in the rulings of the trial judge, we affirm.

Defendant admittedly refused to file income tax returns although he had a gross income in excess of $23,000 for each of the three years in question. He filed a motion to quash the indictment for such refusal, however, on the ground that he had been singled out for selective and discriminatory prosecution for "asserting his First Amendment Religio/Political Freedoms to be a Protestant or Protestor." Defendant contends that his refusal to file a return is a form of protest based on religious convictions and that he was singled out for selective prosecution for exercising the rights and freedoms afforded him by the First Amendment.

In connection with the motion to quash the indictment and the hearing on the motion, Murdock requested discovery of numerous Government documents. The Government produced some of the documents, agreed to an in camera inspection of others, and was relieved from producing some information by court order. After an in camera inspection, the court allowed defendant to see some of the material but denied him access to certain documents.

The Federal Rules of Criminal Procedure govern this case. Rule 16(a)(1)(C) provides that discovery of documents in possession of the Government will be allowed the defendant if they are "material to the preparation of his defense or are intended for use by the government as evidence in chief at the trial, or were obtained from or belong to the defendant." The kind of documents discoverable are generally those that relate to the defendant and the charge against him, not to third persons.

To avoid the use of a discriminatory prosecution defense as a means of obtaining information to which the defendant is otherwise not entitled, other circuits have held that a defendant must prove a "colorable entitlement" to the defense before discovery is allowed. United States v. Oaks, 508 F. 2d 1403 (9th Cir. 1974), aff'd following remand, 527 F. 2d 937 (9th Cir. 1975), cert. denied, -- U. S. --, 96 S. Ct. 3177, 49 L. Ed. 2d 1191 (1976); United States v. Berrios, 501 F. 2d 1207, 1211 (2d Cir. 1974); United States v. Berrigan, 482 F. 2d 171, 181 (3d Cir. 1973). This appears to be a sound rule for this Court to follow. To hold otherwise would encourage the assertion of such defense, no matter how spurious, as a means of burdening criminal trials with massive discovery of material completely irrelevant and immaterial to the defendant's case. The test is materiality, and the court is entitled to have the defendant demonstrate the materiality of what he seeks by proving a colorable entitlement to the defense before discovery is allowed.

Tested by this standard, the defendant fails to show error in the rulings of the trial court. First, a review of the record reveals that defendant has failed to present evidence tending to show that others similarly situated have not generally been prosecuted. Second, there is no showing that the Government's prosecution of him was selective, invidious, in bad faith, or based on impermissable considerations such as race, religion, or his exercise of constitutional rights. See United States v. Smith, 523 F. 2d 771, 782 (5th Cir. 1975) (U. S. appeal pending); United States v. Berrios, supra, 501 F. 2d at 1211-1212.

To the contrary, the record, rather than appearing neutral on the matter, tends to show that defendant was not singled out for any reason other than his failure to comply with the law. The investigation was initiated when a computer print-out showed that defendant, a surgeon, had not filed a tax return, although he had filed in previous years. The Internal Revenue Service decided to prosecute only after a special agent determined that defendant's income was sufficient to require him to file a return, that defendant had not filed a return, and that he did not intend to file a return.

The trial court carefully considered the requests of the defendant, who proceeded pro se as he does here, allowed a great deal of discovery, and applied the correct standards in ruling on the requests. There is no indication that anything which the court denied to defendant would have been material to the preparation of his defense as required by the discovery rules.

Although not asserted to the trial court, defendant also contends on appeal that he is entitled to that which he sought under the Freedom of Information Act, 5 U. S. C. A. §552(a)(2), or the Privacy Act of 1974, 5 U. S. C. A. §552a(d).

The Freedom of Information Act (FOIA) was enacted to provide greater public access to records of the Government agencies. See generally S. Rep. No. 813, 89th Cong., 1st Sess. (1965); H. R. Rep. No. 1497, 89th Cong., 2d Sess. (1966), U. S. Code Cong. & Admin. News 1966, 2418. Although the FOIA sets forth specific procedures for obtaining disclosure of information, we find nothing in the legislative history or the Act itself to indicate whether the FOIA was intended to enlarge the scope of discovery under the Federal Rules of Criminal Procedure. The only reference tangentially relating to this problem is found in the House Report's discussion of the investigatory file exemption under the FOIA, which states that the bill amending the FOIA was not intended "to give a private party indirectly any earlier or greater access to investigatory files than he would have directly in such litigation or proceedings." H. R. Rep. No. 1497, supra, reprinted in U. S. Code Cong. & Admin. News, pp. 2418, 2428(7).

The only circuit that seems to have considered this issue is the Sixth Circuit in Fruehauf Corp v. Thornton, 507 F. 2d 1253 (6th Cir. 1974). In Fruehauf, petitioners sought a writ of mandamus compelling the district judge to stay a pending criminal conspiracy case until counsel could obtain compliance with the district court's order under the FOIA directing the IRS to disclose certain documents. The court denied the requested relief on the ground that petitioners were entitled to discovery under the Federal Rules of Criminal Procedure in their pending case and that any errors committed therein would be subject to appellate review. Citing the Supreme Court's decision in Renegotiation Board v. Bannercraft Clothing Co., Inc., 415 U. S. 1, 94 S. Ct. 1028, 39 L. Ed. 2d 123 (1974), the court stated that "the Freedom of Information Act was not intended to serve as a substitute for criminal discovery." 507 F. 2d at 1254.

In Renegotiation Board, the Supreme Court had considered the issue of the effect of the FOIA on proceedings pending under the Renegotiation Act of 1951. Respondents, whose profits on defense contracts were undergoing renegotiation pursuant to the Act, brought suit under the FOIA to enjoin the Board from withholding requested documents and to stay negotiation proceedings until these documents were produced. The Supreme Court held that no injunctive relief should be granted. Emphasizing that the Renegotiation Act contemplated negotiation without interruption for judicial review, the Court ruled that in a renegotiation case the contractor must pursue its admin istrative remedies under the Renegotiation Act and could not obtain judicial interference with this procedure through preliminary litigation of a FOIA claim. The Court recognized that even though the FOIA's stress was on disclosure, it was on disclosure for the public, and not for the negotiating self-interested contractor. 415 U. S. at 22, 94 S. Ct. 1028. But see Davis, Administrative Law of the Seventies §3A.6-1 (1976). The Court then stated that "[i]nterference with the agency proceeding opens the way to the use of the FOIA as a tool of discovery over and beyond that provided by the regulations issued by the Renegotiation Board for its proceedings. Discovery for litigation purposes is not an expressly indicated propose of the Act." 415 U. S. at 24, 94 S. Ct. at 1040.

Following a similar approach, the United States Customs Court in a case involving the Customs Court rules, vis-a-vis the Government's refusal to produce certain documents claimed under the FOIA, stated that the FOIA was not enacted to provide discovery procedures for obtaining information during litigation, and therefore, the Act did not create a judicial discovery privilege. Verrazzano Trading Corp. v. United States, 349 F. Supp. 1401 (Cust. Ct. 1972). The court reasoned that had Congress intended the Act to apply to judicial discovery proceedings, there would be no need for the provisions giving aggrieved parties a right to redress through the federal district courts. 349 F. Supp. at 1403.

The FOIA provides a comprehensive scheme for private parties to obtain agency records. The Act contemplates that a party seeking disclosure of agency records available under 5 U. S. C. A. §552(a)(1), (2) shall request such records from the agency. If the agency then refuses this request, §552(a)(4)(B) confers jurisdiction on the district court "to enjoin the agency from withholding agency records and to order the production of any agency records improperly withheld from the complainant." See Apicella v. McNeil Laboratories, Inc., 66 F. R. D. 78 (E. D. N. Y. 1975). The burden is then on the agency to establish entitlement to one of the exemptions found in §552(b). 5 U. S. C. A. §552(a)(4)(B). See, e.g., B & C Tire Co., Inc. v. Internal Revenue Service [74-1 USTC ¶9272], 376 F. Supp. 708 (N. D. Ala. 1974).

In a criminal case the discovery proceedings are governed by the Federal Rules of Criminal Procedure, promulgated pursuant to 18 U. S. C. A. §§ 3771, 3772. Since Congress has the power to regulate the practice and procedures in the federal courts, Sibbach v. Wilson & Co., Inc., 312 U. S. 1, 9, 61 S. Ct. 422, 85 L. Ed. 479 (1941), had Congress intended to amend the explicit discovery procedures set forth in Rule 16, Fed. R. Crim. P., by enactment of the FOIA, it undoubtedly could have done so. No such intention appears in either the Act or its legislative history. Cf Title Guarantee Co. v. NLRB, 534 F. 2d 484, 491 (2d Cir. 1976) (U. S. appeal pending) (dealing with the effect of the FOIA on discovery under the National Labor Relations Act).

We hold that the discovery provisions of the Federal Rules of Criminal Procedure and the FOIA provide two independent schemes for obtaining information through the judicial process. Although information obtained through the FOIA may be useful in a criminal trial, we find that the FOIA was not intended as a device to delay ongoing litigation or to enlarge the scope of discovery beyond that already provided by the Federal Rules of Criminal Procedure.

This result is consistent with NLRB v. Sears, Roebuck & Co., 421 U. S. 132, 143 n. 10, 95 L. Ed. 2d 1504, 44 L. Ed. 2d 29 (1975) which held that the right of a plaintiff, who brings an action under the FOIA to compel production of agency documents, is neither increased nor decreased by the fact that he is a litigant in a pending suit. The Court stated that the Act is fundamentally designed to inform the public about agency action and not to benefit private litigants. Besides showing that disclosure under the FOIA is not related to litigation, the Sears, Roebuck & Co. case and numerous district court cases relying on it illustrate the kind of separate action contemplated by the Act. See, e.g., Columbia Packing Co., Inc. v. United States Dept. of Agriculture, 417 F. Supp. 651, 655 (D. Mass. 1976); Capital Cities Communications, Inc. v. NLRB, 409 F. Supp. 971 (N. D. Cal. 1976); Climax Molybdenum Co. v. NLRB, 407 F. Supp. 208 (D. Colo. 1975), aff'd 539 F. 2d 63 (10th Cir. 1976).

Similarly, defendant is afforded no relief under the Privacy Act. This Act was designed to establish a Federal Privacy Board to oversee the gathering and disclosure of information concerning individuals and to provide management systems in federal agencies, state and local governments regarding such information. S. Rep. No. 1183, 93d Cong., 1st Sess., reprinted in U. S. Code Cong. & Admin. News, p. 6916. To accomplish these purposes, the Act contemplates a request by an individual to an agency to gain access to his record, 5 U. S. C. A. §552a(d)(1), followed by institution of a civil action against the agency in the appropriate district court if the agency refuses this request. 5 U. S. C. A. §552a(g)(1). Once again, there is nothing in the Privacy Act or its legislative history to indicate a congressional intent to enlarge the scope of discovery in criminal cases by incorporating the procedure of the Privacy Act into judicial discovery proceedings.

We therefore hold that a criminal defendant has no supplementary discovery rights under these two statutes which would supersede the relevancy and materiality requirements of established discovery law. The district court properly applied the requirements of the discovery rules to the defendant's requests.

AFFIRMED.

^* Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of New York et al., 5 Cir. 1970, 431 F. 2d 409, Part I.