Wednesday, September 30, 2009

Summons Power to Force Summonsed Party to Gather Records from Third Parties (9/30/09)


In a recent summons enforcement case (United States v. Bright, 2009 U.S. Dist. LEXIS 84577 (D. Haw. Sept. 15, 2009), and predecessor case, United States v. Bright, 2009 U.S. Dist. LEXIS 70911 (D. Haw. 2009)), the summonsed party (the taxpayer in the case) was held in contempt for failing to make proper efforts to secure information from a tax haven bank for credit card information related to her account. The court seems to have assumed that it had the contempt power to force the taxpayer to gather the records for the IRS.

I was surprised based on my anecdotal experience that the IRS could force the witness to retrieve information for the IRS. Certainly, the witness would have to produce documents within the scope of the summons held by the witness' agent (such as an attorney or an accountant). Any documents constructively in the witness' possession through agents are certainly fair game. So, the issue is whether the summons power includes the power to direct the summonsed party to use his or her best efforts to get the documents from third parties who are not agents simply because they can.

For example, can the IRS issue a summons to me for today's New York Times that I do not possess and thereby force me to go buy one that I can then produce? I do not think so.

Now, let's focus on bank records. At least for U.S. banks, the historical practice that I have encountered is for the IRS to summons the bank and not the a depositor (usually the taxpayer being investigated) to force him to retrieve the bank records and turn them over. Now, of course, for foreign banks -- tax haven banks in particular -- the IRS usually has no way to summons them or otherwise pressure them for the documents. (In countries with some type of exchange of information agreement, such as the standard double tax treaty, the U.S. with the proper information (taxpayer, bank, etc.,) can get the treaty partner to get the documents, but that is a hassle that can be short circuited through the process discussed here.) Should it make a difference whether the bank is a U.S. bank or a foreign bank or a tax haven bank in terms of defining the proper scope of the summons and contempt power?

One aspect of this type of summons that might be explored in particular cases is that the IRS would have to have very specific information about the existence of the bank account (as it did in Bright). Otherwise, if the IRS is just "fishing," the summons would suffer the same Fifth Amendment infirmities as the grand jury subpoena in the infamous Hubbell case (United States v. Hubbell, 530 U.S. 27 (2000)) and would implicate the concerns presented with the consent directive (see Doe v. United States, 487 U.S. 201 (1988)).

Let's consider some examples to test just how far the concept can go. Keep in mind the concept is that the summons power can force the taxpayer to gather documents otherwise not within his possession to deliver to the IRS.

Example 1: The IRS summonses the taxpayer ("T") to produce records that are, in fact, owned, possessed and controlled by a business associate ("BA") in England. T has no right to force BA to give him the documents (or a copy), but the truth is that, if T asked sincerely, BA would probably deliver them to T. Can the IRS use the summons power to force T to make the request?

Example 2: T does not have his cell phone records for the last 3 years (he gets them digitally by email and routinely destroys them after reviewing them). The cell phone company would deliver them to T upon request. The IRS summonses T for the records. Is T required to request them from the cell phone company so that T can respond to the request? Does or should it make a difference if the cell phone company is a foreign company?

Do the readers have any further thoughts? I have not undertaken to research the issue, so if any reader has, I would appreciate receiving their thoughts and, if possible, the authorities addressing the issue.

UPDATE AS OF 10/7/2009

I now think courts would enforce a summons (or other compulsory process) to require a summonsed party to make good faith efforts to obtain the summonsed parties offshore bank account records. I received enought anecdotal feedback from readers (including comments below), that I am convinced that it happens and summonsed parties dance to the tune called by the judge threatening to put the in jail if they don't go get the records. I still have not found any authority directly on point (suspect some may be out there but just have not spent the time looking). Some of the issues are, however, addressed in United States v. Norwood, 420 F.3d 888 (8th Cir. 2005). I provide the pertinent part of the Norwood decision (pp. 895 and 896):

Norwood argues that his Fifth Amendment privilege against self-incrimination would be violated by enforcement of the IRS summons. The Fifth Amendment provides that "no person . . . shall be compelled in any criminal case to be a witness against himself." U.S. Const. Amend. V. This language has been interpreted to prohibit compelled production of evidence where the communicative aspects of such production are testimonial and incriminating. Fisher v. United States, 425 U.S. 391, 408, 48 L. Ed. 2d 39, 96 S. Ct. 1569 (1976); United States v. Teeple, 286 F.3d 1047, 1049 (8th Cir. 2002).
The district court found that because the IRS already knew of the existence of the two Leadenhall cards and a corresponding account, the existence of the documents associated with the cards and account was a "foregone conclusion." The production of documents the existence of which is a foregone conclusion is not testimony for purposes of the Fifth Amendment. Fisher, 425 U.S. at 411. When the existence of documents is a foregone conclusion, the taxpayer's concession that he has the documents would add "little or nothing" to the government's information, and the "the question is not of testimony but of surrender." Id. (internal quotation omitted). Whether the existence of documents is a foregone conclusion is a question of fact, subject to review for clear error. United States v. Doe, 465 U.S. 605, 613-14, 79 L. Ed. 2d 552, 104 S. Ct. 1237 (1984).
Norwood asserts that the summons did not specifically identify documents the existence of which was a foregone conclusion, and that it therefore fell short of the specificity required by United States v. Hubbell, 530 U.S. 27, 44-45, 147 L. Ed. 2d 24, 120 S. Ct. 2037 (2000). In Hubbell, the Court held that the existence of "general business and tax records" possessed by the defendant was not a foregone conclusion for Fifth Amendment purposes where the government could not show that "it had any prior knowledge of either the existence or the whereabouts" of the documents in question. Id. at 45. Here, Norwood does not dispute that the IRS has prior knowledge of two Leadenhall payment cards and one Leadenhall account controlled by him. He contends that the summons includes documents outside the IRS's prior knowledge, however, because the language of the summons is not restricted to Leadenhall cards and account. It is true that the summons as written is not restricted to records associated with Norwood's Leadenhall cards and account, but the government seeks enforcement of the summons only to the extent that the documents requested are a foregone conclusion. (Br. of Appellee at 10 n.2). The district court's memorandum, moreover, relied on the government's knowledge of the Leadenhall cards and account as the basis for its decision that complying with the summons would not implicate the Fifth Amendment. We therefore interpret the district court's order to enforce the summons only to the extent the summoned records pertain to Norwood's Leadenhall cards and account.
The existence of the requested records relating to Norwood's Leadenhall cards and account is a foregone conclusion. The summons seeks records such as account applications, periodic account statements, and charge receipts, all of which are possessed by the owners of financial accounts as a matter of course. Norwood does not [*896] contend that he does not possess any of these documents, and the government knows far more about the documents associated with Norwood's Leadenhall cards and account than it did about the defendant's business records in Hubbell. 530 U.S. at 44. In Hubbell, the government could not show "any prior knowledge of either the existence or whereabouts" of the documents sought. Id. (emphasis added). Here, by contrast, the government knows the name and location of the bank that created the records sought, Norwood's payment card numbers, and even the details of a number of discrete transactions involving the cards and his Leadenhall account. Accordingly, the district court's conclusion that "Norwood's production of the records has no testimonial significance," (Add. at 4), is not clearly erroneous.


  1. Jack, this is really a simple and straightforward question of actual or constructive custody, control or possession over the demanded/requested/summonsed records. If the summonsed party can "retrieve" or "withdraw" or in any way "obtain" the summonsed records from a third party (domestic or foreign), then he or she is required to make his or her best efforts to do so in order to comply with a given official demand (summons/subpeona/civil investigative demand).

    As you are aware, Hubbell and its progency indicate that, if the demanding party (i.e., the IRS, the government or even a private litigant) can establish through competent substantial evidence that the existence and custody of the records demanded is a "foregone conclusion," the summonsed party, there is no Fifth Amendment "Act of Production" Privilege. This is so because, applying the so-called "independent source doctrine", the demanding party has supplied probative evidence as to the existence and custody of the demanded records through his/her/its own independent investigative efforts and from legitimate independent sources.

    Please take a close look at the Fifth Amendment jurisprudence as enunciated by the US Supreme Court in Kastigar, Maness v. Meyers, Couch, Fisher, Doe I (1984), Doe II (1988, Braswell and Hubbell. Let us know what you think.

  2. Thanks, anonymous. I am familiar with all authorities cited, but still don't think that they address the issue of whether a summonsed party must affirmatively act to place in his actual possession documents that are not otherwise in his actual or constructive possession. Maybe this is a bit circular if the law defines such documents as being in his constructive possession.

    As I mentioned, can the IRS summons me to obtain my U.S. provider cell phone records and deliver them to the IRS, or must the IRS summons them from the U.S. provider? I see no reason for differentiating the U.S. provider from the foreign provider (either cell phones or bank accounts) in terms of the scope of the summons power to compel the summonsed party to act. So, do you have some direct authority to that effect -- perhaps even IRS self serving claims in the IRM or some other internal publication?

  3. Jack,

    Thank you for your feedback. I certainly appreciate the opportunity to exchange important information with a fine professional of your stature.

    While I do not believe that I have a specific, pin-point citation to authority responsive to your particular question as well as for the very proposition I am advocating, I can offer two (2) things.

    First, I would like to take the opportunity to research the matter and provide you with the authorities I find.

    Secondly, I believe that the decisions in In re: Lawrence, 227 B. R. 907 (Bankr. SD Fla. 1999), affirmed on appeal at 251 B.R. 630 (SD Fla. 2000), further affirmed on subsequent appeal at 279 F. 3d 1294 (11th. Cir. 2002), stand for the proposition that a summonsed party must make every reasonable effort to obtain the demanded documents, recorded information and any tangibles subject to a "turnover order" in order to avoid the consequences of being found in contempt of court.

    In In re: Lawrence, cited above, Stephan Lawrence set up and funded an offshore asset protection trust just weeks after an arbitration award against him for over $20,000,000 due to a margin account deficit due to the 1987 stock market crash. Mr. Lawrence then filed bankruptcy. The court discredited Mr. Lawrence's testimony that he was no longer a beneficiary of the trust and found that he still had control over the trust, including the power to repatriate the trust assets. Mr. Lawrence was held in contempt and jailed for not complying with the order to repatriate.

    Mr. Lawrence remained in jail for about six years, after which time he was released by the court, based on a ruling that there was no realistic possibility that Mr. Lawrence would comply with the order for repatriation.

    While I would certainly concede that the Lawrence case was not a case of enforcement of a duty under the Internal Revenue Code, nevertheless, I firmly believe that it very much stands to reason that, in any given case, such as an IRS summons enforcement proceeding, where a summonsed party is found by and through the preponderance of competent substantial evidence to be in actual or constructive control of existing records (as well as tangibles), that party must either "obtain" them from their actual (or nominal) custodian or potentially expose him/herself to the consequences of being prosecuted, convicted and punished for civil contempt.

    As the Lawrence case and a few other cases so clearly demonstrate, there are certainly instances where civil contemnors have suffered rather long periods of incarceration based on the premise that such hardships are calculated to bring about compliance with the Court's order. Mr. Lawrence was jailed for almost 6 years. A cursory search of Westlaw, Lexis, the National Lawyer's Guild's Grand Jury Manual and even Google, for that matter, reveal that others have been jailed by federal and state courts for longer periods of time.

    Further, I would certainly urge that a close reading of the US Supreme Court's decision in US v. Rylander (1983) supports the view that, where there has been an of-record determination as to the existence and control (including constructive control or custody) of summonsed records, a summonsed party (especially in the context of a contempt proceeding as compared to a proceeding at a summons enforcement stage)must either comply fully with the Court's order or demonstrate his or her impossibility to do so by adducing competent and substantial evidence to that effect.

    I hope this helps. Please let me know what you think.

    Thanks, again, for the opportunity to engage in this most important exchange with one of the leading authorities on Federal Tax Practice and Procedure.

  4. Jack,

    The 9th Circuit's decision in US v. Vetco, Inc., 644 F. 2d 1324 (9th. Cir. 1981), and subsequent cases based on that case as well as distinguishing the US Supreme Court's holding in Societe Internationale v. Rogers, 357 U. S. 197 (1958), indicate that where the IRS (or any other governmental or nongovernmental litigant for that matter) establishes as a "foregone conclusion" the existence and possession (including "constructive custody") of the summonsed records, the summonsed party must make diligent efforts to "obtain" them from their actual or nominal custodians.

    To be certain, this is to be distinguished from a summonsed party being compelled to purchase a given day's publication of the New York Times. This is because, whether or not it can be shown that a given summonsed party can afford to purchase such publication, the demanding party cannot show that the summonsed party actually or constructively possesses the same unless it can be shown that the summonsed party has a subscription for the same and that any cost or inconvenience associated with compliance would be de minimus.

    In a similar vein, it stands to reason that, as a general proposition, a procedurally proper federal tax lien attaches per section 6331 of the Internal Revenue Code to the debtor-taxpayer's property and rights to property which, by way of instance, excludes from its scope the debtor-taxpayer's ability to access such credit facilities as a credit card's cash advance privilege as well as the ability to access cash on a home equity line.

    Stated another way: the IRS cannot, as a general matter, force a given debtor-taxpayer to incur debt or get a cash advance on a visa or master card credit line (or a home equity credit line) because those credit facilities do not constitute "property" or "rights to property" under section 6331 of the IRC.

    It is conceivable that the IRS and the debtor-taxpayer are, for the most part, free to enter into a negotiated agreement such as an Offer in Compromise that could potentially involve the debtor-taxpayer accessing a given credit line (such as a visa or master card cash advance or a cash advance from a home equity line) in order to satisfy the debtor-taxpayer's pre-existing, current or even future tax obligations in accordance with such agreement. This, of course, assumes that, as a threshhold matter, the actual financial instution/issuer of the visa/master card credit line or home equity loan agrees to the use of its credit facility for such purposes.

    QUERY: Does a financial institution extending a visa/master card credit card or home equity loan credit facility genuinely contemplate the use of such credit facility(ies)for the funding of an agreement such as an Offer in Compromise for the payment of a pre-existing, current or future tax obligation given that: 1. such credit facilities are intended for personal, family and household use; and, 2. the debtor-taxpayer would be seeking to obtain the benefit of satisfying the IRS, a creditor that could be classified as a "secured" and/or "priortity" claimholder in a bankruptcy proceeding with a creditor (the bank or financial institution extending the credit facility) that could potentially be classified as an "unsecured" or "undersecured" "nonpriority" creditor?

    Quite apart from any moral or ethical issue, I, for one, hardly think that a bank or financial institution would knowingly give a borrower, who also happens to be obligated to pay certain tax debts (based on a procedurally proper assessment) "carte blanche" to access a credit facility with the intention of endangering the financial institution's ability to recover (including but not limited to the financial institution's security interest and priority of its claim) the sums advanced plus interest and other appropriate charges.

  5. To Anonymous:

    I agree with you that the compulsory process powers (such as summons and subpoena) can be used to force a summonsed party to use good faith efforts to retrieve records from an offshore bank. I will update the the blog to include some discussion of that conclusion. I get there a different way that you do.

    I do note that the opinion you cite, US v. Vetco, Inc., 644 F. 2d 1324 (9th. Cir. 1981) was withdrawn and a new opinion issued at United States v. Vetco, 691 F2d 1281 (9th Cir. 1980), cert. denied, Vetco, Inc. v. United States, 454 U.S. 1098 (1981). I don't think that affects your analysis, however.

    Thanks for your input.

    Jack Townsend

  6. Jack,

    Thank you for your 10/07/09 Update and for citing to the important parts of the 8th. Circuit's decision in United States v. Norwood, 420 F 3d 888, 895-96 (8th. Cir. 2005).

    I agree with the 8th. Circuit's analysis. I think the Court did a fine job of distinguishing the US Supreme Court's decision in Hubbell based on the reason that Hubbell was clearly subjected to a "fishing expedition."

    I have a few observations as to the litigation of controversies involving the issue of "foregone conclusion" as an exception to the Fifth Amendment's Act of Production Privilege.

    First, the cases I have reviewed do not indicate that the government's "foregone conclusion" assertions were subjected to serious adversarial testing involving resort to such time-honored fact-finding tools as the taking of depositions (including designated depositions of the government's purported fact witnesses under rule 30(b)(6)))and full-course evidentiary hearings.

    Although the nuance of summons enforcement proceedings being so-called "summary proceedings" is certainly not lost on me, I would, nevertheless, strongly advocate that there is a fundamental right of due process which, among other things, requires the adversarial testing of adverse witnesses's stories. In that vein, I would think that subjecting government witnesses including IRS agents to penetrating, in-court, on-the-record questioning (by way of cross examination or being treated as "hostile witnesses" on direct examination) could lead to a different factual and legal result than relying on affidavits.

    Secondly, even if the district court were to determine that the Fifth Amendment Act of Production Privilege does not apply based on a finding of fact that there is a "foregone conclusion" as to the issues of existence and custody (and perhaps even "authentication"), the US Supreme Court's 1975 decision in Manness v. Meyers stands for the proposition that the summonsed party would be waiving his or her Fifth Amendment right if he or she complies with the Court's order instead of: (1) subjecting him/herself to being cited for contempt; (2) taking an immediate expedited appeal; and, (3) seeking a stay of the incarceration and/or fines pending the outcome of the appeal (from the district court in the first instance and from the court of appeals if the district court denies a stay).

    While litigating one's Fifth Amendment right in the trial and appellate courts is quite expensive, waiving that fundamental right and exposing one's self to criminal prosecution which could result in years of incarceration could prove disastrous.

    Lastly, I have not found that any litigants have raised any Gelbard issues in connection with any summons enforcement proceedings including those where the "foregone conclusion" issue was litigated.

    To the extent that the government has received any information that is relevant to the "foregone conclusion" issue through any unlawful wiretaps (or any violations of Title III of the Federal Wiretap Act, including unlawful infringement on private electronic communications), the summonsed party could have reasonable cause for relief from complying with any summons and avoid being found in contempt. This is because Gelbard and its progeny stand for the proposition that the summonsed party would have a right to litigate any Title III violations before he or she is required to comply with anything.

    I would welcome hearing more about your views regarding the foregoing legal strategies.

  7. Anonymous,

    Thank you so much. It is clear that you have put a lot of thought and research into the issue.

    1. You, correctly in my mind, spot the tension between the summary nature of the proceedings and the important Fifth Amendment concern in the Act of Production / foregone conclusion issue. I think it has to be left to the trial judge to resolve that tension in a way that properly preserves the Fifth Amendment privilege. To me that means more testing than normally appropriate in a summons enforcement proceeding and, depending upon the unique circumstances, may involve full adversarial proceedings.

    2. Your comment that the summonsed party is between a rock and a hard place if the court orders enforcement is entirely correct. Given the importance of prompt responses to the overwhelming majority of summonses, I don't see courts or congress making the summons enforcement proceeding non-summary or making the compulsion await the finality of appellate proceedings. So that leaves the summonsed party between a rock and a hard place.

    3. I have not considered Gelbard issues. I doubt that I'll have the time and perhaps the interest to think deeply about those issues until and unless the arise in a client situation. Still, I am now alerted to the issues and can focus on them when I need to.

    Thanks for your excellent questions and analyses. I do note that you can, if you wish, identify yourself either in your response to the blog or by email to me at If you do the latter and do not desire me to identify you on the blog, I will not. I would like to know who you are. And, of course, if you have ideas for the blog, please let me know. Indeed, if you would like to "publish" yourself on the web for an appropriate subject, let me know that also. Thanks again.

  8. I read the comments by Anonymous on the Lawrence case. The first order he mentions is really: In re: Lawrence, 227 B. R. 907 (Bankr. SD Fla. 1998), which was issued in 1998, not 1999. That order was a sanction order that resulted from a discovery hearing, held in July 1998, in a denial of discharge proceeding. The appeal of that discharge sanction order was defaulted by Lawrence's counsel. It was a one line ruling in that order — that the assets transferred in 1991, six years before the bankruptcy filing, were bankruptcy estate assets — that was used to create an indeterminate multi-million liability for Lawrence, later enforced through turnover and contempt orders. The discharge order was always treated as a final order that was not subject to any possible challenge during the later turnover and contempt proceedings. Importantly, no challenge to the personal liability the discharge order allegedly established was permitted.
    However, the objection to discharge complaint never, nor could it, claim such liability since a discharge proceeding is controlled by 11 U.S.C. § 727, which provides no such relief. For a more complete history, including self-incrimination issues, see
    Indeed, what Anonymous does not mention is that the 1991 trust was already a defendant in federal court in Pompano-Windy City Partners v. Bear Stearns, Case No. 93-6489-CIV-KING (S.D. Fla), in which Bear Stearns sought to execute its judgment against Lawrence. There, in late 1996, Federal District Judge Lawrence King ruled that the trust had title to the 1991 settlement funds, and that the trust, not Lawrence, must be sued to obtain trust assets. Bear Stearns then impleaded the trust.
    Also, the discharge order was not, as anonymous says, "affirmed on appeal at 251 B.R. 630 (SD Fla. 2000)." That later order was issued in the entirely separate appeal of the bankruptcy court's turnover and contempt orders issued in late 1999, over a year after the discharge order was issued. The bankruptcy court applied "res judicata" to the "finding" in the discharge order that the trust's assets were estate property by ruling it was a final order. Thereby, the estate property finding was treated as an unchallengeable money judgment against Lawrence that was subject to execution as a bankruptcy "turnover." In In re Lawrence, 279 F. 3d 1294 (11th. Cir. 2002), the 11th Cir. affirmed the turnover and contempt order appeals without addressing the merits of any challenge to the discharge order's findings that the trust's assets were estate property. It ruled the discharge order was a final order that could not be challenged in that appeal.

    Many of the Fifth Amendment issues referred to in your post arose in the contempt proceedings and are contained in the above linked petition for certiorari. Additional information is in

    The Gelbard wiretap issue was also raised in the Lawrence case. In late 2004, it was first disclosed that the bankruptcy trustee and Bear Stearns were eavesdropping on all of Lawrence's attorney-client and other phone calls from the FDC Miami, including calls with appellate counsel, during and after his many appeals.

    After the initial appeal to the 11th Circuit in 2000 that court ruled it had no jurisdiction in all later appeals. It thereby never addressed the merits of any later claim, including the claims based on the self-incrimination privilege, other constitutional claims, and electronic surveillance claims.

    Additionally, there was extensive other litigation in British and Swiss courts against the same trustee who was sued in the Pompano case. In those foreign cases, the courts refused to recognize the 1998 denial of discharge order, notwithstanding its "estate property" finding, as an enforceable money judgment. So those cases all failed.

    The full history of the Lawrence case is must reading for anyone concerned with self-incrimination issues and contempt proceedings.


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