Reporter

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7213- Criminal Penalties for Unauthorized Disclosure of Information: Reporter

 

 

[81-2 USTC ¶9613]United Liquor Company, Plaintiff v. Gary Gard and Ira John Doe, Defendants

U. S. District Court, Dist. Ariz. , No. Civ. 78-999 Phx. Cam., 5/21/81

[Code Secs. 6103 and 7213]

Disclosure of return information: Civil action for damages: Discovery of unnamed agent.--A taxpayer's motion to hold a reporter in contempt was denied and the reporter was allowed to assert the Fifth Amendment in response to the taxpayer's attempts to discover the IRS source of the information concerning the taxpayer's returns which information was disclosed in the reporter's newspaper articles. Since Code Sec. 7213 provides felony sanctions for disclosure and publication of return information, the identity of the reporter's source could further incriminate the reporter.

James Powers, Powers, Ehrenreich, Boutell & Kurn, 3500 N. Central, Phoenix , Ariz. 85012 , for plaintiff. J. Loss, United States Attorney, S. Martin Teel, Jr., Department of Justice, Washington, D. C. 20530, for defendants. James F. Henderson, Gust, Rosenfeld, Divelbess & Henderson, 201 N. Central Ave., Phoenix, Ariz. 85073, for Jerry Seper.

Opinion and Order

MUECKE, Chief Judge:

This cause is before the Court on plaintiff's Motion for Contempt Order Against Witness Jerry Seper, filed April 17, 1981 .

Background

Plaintiff's Second Amended Complaint was filed on April 21, 1980 , pursuant to 26 U. S. C. §7217. The Complaint alleges that the Internal Revenue Service acquired "return information" within the meaning of 26 U. S. C. §6103(b)(2) during an official examination of plaintiff's income tax returns; that "return information" was disclosed to Jerry Seper, a newspaper reporter not a defendant in this case by an unnamed agent for the Internal Revenue Service; and that this disclosure was in violation of 26 U. S. C. §6103(a). The basis for plaintiff's allegations is two newspaper articles, authored by Seper, in which Seper reported that plaintiff was the subject of a tax investigation. (See attached Exhibit A and Exhibit B). [Not reproduced herein.--CCH.]

Throughout this action, plaintiff has unsuccessfully attempted to persuade Seper to reveal his sources. Without this information, plaintiff is unable to name a defendant.

At previous depositions, Seper has premised his refusal on an alleged newsman's privilege, claiming that to compel disclosure would violate the First Amendment to the Constitution of the United States . This Court has issued two written opinions on this subject, both of which rejected Seper's argument. See United Liquor v. Gard [80-2 USTC ¶9578], 88 F. R. D. 123 (D. Ariz. 1980). In its second decision, [80-2 USTC ¶9827] this Court specifically stated that its ruling on the First Amendment issue did not preclude Seper from claiming the Fifth Amendment privilege against self-incrimination--a privilege on which Seper had not chosen to rely:

The Court can understand Seper's reluctance to testify. If the John Doe Defendant is in violation of §7213, Seper himself may be guilty of a felony. See Branzburg v. Hayes, supra, at 696-97, 92 S. Ct. 2664. In this event, however, Seper could protect himself by taking the Fifth Amendment.

Id. at 130.

Following this Court's second rejection of Seper's newsman's privilege, plaintiff again attempted to depose Seper as to his sources. Once more Seper refused. For the first time, however, Seper added the Fifth Amendment to his list of justification. Citing this Court's prior Order that "upon renewal of the taking of his deposition Jerry Seper shall answer the questions propounded by plaintiff regarding the source(s) of the 'return information' disclosed under his byline and other 'return information' revealed to him regarding plaintiff." id. at 127, plaintiff would have this Court use its contempt powers to coerce Seper's testimony.

ARGUMENT: Plaintiff argues that Seper's previous disclosures, combined with Seper's failure to claim the Fifth Amendment in the first instance, have resulted in a waiver of Seper's right to base his present refusal on the Fifth Amendment. The previous disclosures relied on by plaintiff are Seper's admissions that he authored the articles in question and that he received the information therein from an agent of the I. R. S. and Seper's testimony that Gary Gard (the original named I. R. S. defendant) was not the source of Seper's information. (Gard was subsequently dismissed by the Court as the named defendant.)

ANALYSIS: Plaintiff's argument raises two issues. The first involves the legal standard to be applied to Seper's claim that his refusal to name his sources is covered by the Fifth Amendment. The second issue is whether, under that standard, Seper can prevail.

The Standard

The primary authority relied on by plaintiff is the Supreme Court's decision in Rogers v. United States, 71 S. Ct. 438 (1951). In that case, petitioner was a witness before a grand jury investigating the Communist Party.

Petitioner freely testified that she had, in the past, been the Treasurer of the party, and that, by virtue of her position, she had been in the possession of party records and membership lists. She refused to identify the person to whom she had given the documents, however, stating that "I don't feel that I should subject a person or persons to the same thing that I'm going through." Id. at 439. Later, in the face of a contempt citation, petitioner raised the Fifth Amendment.

Although the Court labeled petitioner's claim of the privilege to be "pure after-thought," it went on to state that even if petitioner had raised the Fifth Amendment in the first instance, she would not have been justified in refusing to answer. This conclusion was based on the Court's findings that the name of the person to whom petitioner gave the records presented no "real danger of legal detriment arising from the disclosure" and that petitioner's "response to the specific question in issue here would not further incriminate her." Id. at 442.

The Rogers Court adopted the view that "where criminating facts have been voluntarily revealed, the privilege [against self incrimination] cannot be invoked to avoid disclosure of the details." Id. The Court held that, in each instance, the issue is

whether the question presented a reasonable danger of further crimination in light of all the circumstances, including any previous disclosures. As to each question to which a claim of privilege is directed, the court must determine whether the answer to that particular question would subject the witness to a 'real danger' of further crimination.

Id. ¹

The distinction adopted by the Rogers Court between "detail" and "further crimination" is not easy. In two post-Rogers cases, however, the Ninth Circuit has provided guidance.

In Hashagen v. United States, 283 F. 2d 345, 351-52 (1960), the Ninth Circuit discussed the Rogers holding. It concluded that

the touchstone in Rogers , is the adjective "further," and thus an admission of a criminating fact may waive the privilege as to the details of that fact so long as they do not further incriminate, but where those details would so incriminate, the privilege is not waived.

Id. 352. (Emphasis in original.)

In Master Key Litigation, 507 F. 2d 292 (9th Cir. 1974), the Ninth Circuit reaffirmed its holding in Hashagen, supra, and elaborated on the meaning of the term "further incrimination." In that case, the Court held that if the answers to the government's questions "could possibly provide such a link [in the chain of evidence needed in a subsequent criminal prosecution], the witness may refuse to answer." Id. at 294. (Emphasis in original.)

Plaintiff argues that Hashagen and Master Key have been overruled by the Supreme Court's more recent decisions in Garner v. United States [76-1 USTC ¶9301], 96 S. Ct. 1178 (1976) and Roberts v. United States, 100 S. Ct. 1358 (1980). ² Neither of these cases, however, involved circumstances which are analogous to the case before this Court.

In Garner, supra, a defendant charged with a criminal gambling conspiracy sought to suppress the introduction of his answers on his income tax returns on the grounds that such evidence would violate his Fifth Amendment privilege against self-incrimination. The Court rejected this argument, reasoning that defendant had been free to claim the Fifth when he submitted his returns. Having voluntarily disclosed this information, its subsequent use in a criminal proceeding was in no sense "compelled."

In the present case, the issue is not whether the Government can use evidence that Seper has previously disclosed. The question is whether a civil plaintiff can compel previously undisclosed information.

The Supreme Court's decision in Roberts, supra is similarly distinguishable. In that case, the issue was the conditions under which the Government could use a criminal defendant's failure to answer a question in connection with computing defendant's sentence. Prior to his conviction on drugrelated charges, petitioner admitted to delivering heroin to another man and to discussing drug transactions in certain intercepted telephone conversations. Despite these admissions, petitioner refused to name his suppliers. At no time prior to sentencing did petitioner claim that his refusal was based on the Fifth Amendment, even though he had the opportunity to do so. It wasn't until after sentencing that petitioner argued that the Court's use of his refusal in determining petitioner's sentence violated the Fifth Amendment. The Court rejected this argument, holding that "if petitioner believed that his failure to cooperate was privileged, he should have said so at a time when the sentencing court could have determined whether his claim was legitimate." Id. at 1364.

Again, this Court is not dealing with the question whether Seper's refusal to name his sources can be used adversely against him in a subsequent proceeding. The question is whether, in the face of Seper's objections, plaintiff can compel Seper's testimony. Under these circumstances, the test is as stated by the Ninth Circuit in Hashagen, supra, and Master Key, supra: given the applicable criminal law and Seper's previous testimony, will the disclosure of Seper's sources possibly provide a link in the chain of evidence needed to convict him? In other words, does Seper stand in danger of "further crimination?"

Application of the Standard

In order to ascertain the danger of "further crimination," it is necessary to analyze the applicable criminal law.

26 U. S. C. §6103 establishes the general rule that income tax "return information" is confidential and should not be disclosed. §6103's definition of "return information" includes

a taxpayer's identity, the nature . . . of his deductions, . . . whether the taxpayer's return was, is being, or will be examined or subject to other investigation . . ., or any other data . . . furnished to . . . the Secretary with respect to . . . the determination of the existence, or possible existence, of liability (or the amount thereof), of any person under this Title for any tax . . . or offense . . ..

Note that §6103's prohibition against disclosure of return information is not absolute. §6103(k)(6), for instance, provides that disclosure of return information by IRS personnel is authorized to the extent necessary to obtain information relating to an IRS investigation, or to verify accuracy and potential liability. There are other exceptions.

The confidentiality provisions of §6103 are enforced by both civil ³ and criminal law. 26 U. S. C. §7213, the criminal statute, provides felony sanctions for disclosure of "return information" in violation of §6103, and for publication of information disclosed. §7213 is directed at both the source and the recipient. §7213(a)(3) specifically provides that

It shall be unlawful for any person to whom any return or return information (as defined in section 6103(b)) is disclosed in a manner unauthorized by this title thereafter willfully to print or publish in any manner not provided by law any such return or return information.

(Emphasis added).

This Court concludes that, under the above statute, the identity of Seper's sources may well tend to "further incriminate" Seper. While it is clear that Seper's articles contain "return information" within the meaning of §6103, ⁴ the identity of Seper's sources has obvious relevance to the question whether the source's disclosure was "authorized" within the meaning of §6103 and §7213(a)(3). Moreover, as argued by Seper, and as not contested by plaintiff, the "willfulness" element of §7213(a)(3) may require that Seper "know" that the disclosure was unauthorized before he can be criminally liable. See S. Rep. No. 94-938, 94th Cong. 2d Sess. 341, 348, reprinted in 1976 U. S. Code Cong. & Admin. News, 3437, 3777. Without the informant being named and known, it would be very difficult for the Government, should it choose to prosecute Seper, to prove that the IRS agent's disclosure was not "authorized," and that Seper was aware of this fact. ⁵

Plaintiff argues that Rogers v. United States , supra, stands for the proposition that, unless the identity itself of the source constitutes a previously undisclosed element of a crime, then the witness-value of the source to the Government cannot be considered. Rogers never went this far. As previously stated, the Court in Rogers simply determined that, given that petitioner's previous admissions, and given the relevant criminal law, the disclosure of petitioner's successor presented "no more than a 'mere imaginary possibility' of increasing the danger of prosecution." 71 S. Ct. at 443.

The best answer to plaintiff's argument was stated in Hashagen v. United States , supra at 347:

It is not merely an admission of guilt of a federal crime, or of a probative fact which, with others, may aid in establishing guilt, that may be withheld; the privilege to remain silent may also be validly asserted where the answer to a question would be likely to provide a lead or clue to a source of evidence of such crime, and thus furnish a means of securing one or some of the "links in the chain of evidence" required for federal prosecution of the witness.

(Emphasis added). See also United States v. Neff [80-1 USTC ¶9397], 615 F. 2d 1235, 1239 (1980).

Plaintiff's final argument is that the real reason for Seper's assertion of the Fifth Amendment is the protection of Seper's source--not fear of prosecution, and that the protection of others is not a sufficient basis for the privilege against self incrimination. See Rogers v. United States , supra, 440-441. While it is true that the Fifth Amendment is personal to the witness, it cannot be assumed, given the reality and appreciability of the hazard petitioner claims to be facing, as these have been analyzed herein, that Seper is not seeking the privilege's protection in good faith. See United States v. Carlson [80-1 USTC ¶9299], 617 F. 2d 518, 523 (9th Cir. 1980).

In accordance with the foregoing opinion,

IT IS ORDERED that plaintiff's motion for contempt is denied and that witness Seper may validly assert the Fifth Amendment in response to plaintiff's attempts to discover the source(s) of the information disclosed in Seper's articles.

IT IS FURTHER ORDERED that within twenty (20) days of plaintiff's receipt of this Order, plaintiff will provide this Court with a memorandum showing cause why plaintiff's action should not be dismissed for inability to name a defendant.

¹ Under this standard, taking into account the facts that petitioner had admitted to being Treasurer of the Communist Party, the Court held that disclosure of the identity of petitioner's successor presented "no more than a 'mere imaginary possibility' of increasing the danger of prosecution." Id. at 443.

² Plaintiff also cites United States v. Carlson [80-1 USTC ¶9299], 617 F. 2d 518 (9th Cir. 1980), in support of his view that Hashagen, supra, and Master Key, supra, are no longer good law. Plaintiff, in oral argument, took the position that the balancing approach taken in Carlson was inherently inconsistent with the liberal view expressed in the earlier decisions. This balancing approach, however, which weighs a defendant's right to assert the Fifth Amendment against the public's right to the information withheld, has been reserved for cases in which a defendant was attempting to avoid a reporting statute by asserting the Fifth Amendment. Carlson itself involved a tax protester who claimed 99 exemptions so that no income tax would be withheld by his employer. When called upon to submit correct returns, defendant asserted the Fifth Amendment, alleging that he desired to avoid incriminating himself for having previously filed false withholding forms. California v. Byers, 91 S. Ct. 1535 (1971), the decision upon which Carlson relied, involved the constitutionality of hit-and-run statutes which also required a report of the accident to be filed, and to which requirement a Fifth Amendment privilege was asserted. Plaintiff cites no authority that the Carlson/Byers analysis applies outside the context of those cases.

³ Section 7217, the statute under which plaintiff sues, establishes a civil cause of action in favor of the injured taxpayer against "any person who knowingly, or by reason of negligence, discloses return information in violation of §6103."

⁴ One of Seper's arguments in opposition to plaintiff's contempt motion was that this Court's previous Order directed Seper to disclose the source(s) of the "return information" appearing in Seper's articles. Seper argues that his articles contained no "return information." Having compared the content of Seper's articles with §6103's definition of "return information," this Court concludes that Seper's argument is without merit.

⁵ In this Court's Opinion and Order on Seper's motion to reconsider, see F. R. D. 123, 130, the Court suggested by reference to the Supreme Court's decision in Branzburg v. Hayes, 92 S. Ct. 2646, 2664 (1972), that Seper stood in danger of prosecution under 18 U. S. C. §4, which provides that

Whoever, having knowledge of the actual commission of a felony cognizable by a court of the United States, conceals and does not as soon as possible make known the same to some judge or other person in civil or military authority under the United States, shall be fined not more than $500 or imprisoned not more than three years, or both.

While Seper has not argued the applicability of this particular provision, its existence is relevant to the question whether disclosure of the identity of Seper's sources might tend to incriminate Seper. As a practical matter, it would be extremely difficult to prosecute Seper pursuant to this statute unless the Government were able to identify the perpetrator of the felony--Seper's source.