Thursday, December 19, 2013

Yet Another Government Victory on the Required Records Doctrine (12/19/13)

We have another required records opinion, this time from the Second Circuit.  In re: Grand Jury Subpoena Dated February 2, 2012, 741 F.3d 339 (2d Cir. 12/19/13), here.

I have not studied the opinion but my quick perusal of it saw nothing new in the basic analysis.  The opinion is 30 pages and concludes:

The required records exception to the Fifth Amendment privilege against self‐incrimination still exists. The BSA’s requirements at issue here are “essentially regulatory,” the subpoenaed records are “customarily kept,” and the records have “public aspects” sufficient to render the exception applicable. Because Doe cannot lawfully excuse his failure to comply with the subpoena, the district court was within its discretion to impose sanctions for his noncompliance.
I guess I am little surprised that, given the consistent holdings of the courts of appeals, the courts are still spending significant resources to replow the same ground over and over and over.  Of course, each court of appeals has to reach the an independent conclusion, but once it reaches the conclusion, does it have to say basically the same thing at great length in different words when it could incorporate by reference other holdings that are equally as good?

A couple of other excerpts that I found interesting:

1. On the evolution of the Fifth Amendment privilege to documents via the Act of Production privilege (pp. 8-9):
The privilege has thus evolved since its inception to a broader prophylactic regime that, in certain circumstances, protects individuals from producing documents where they are incriminated by the contents of the documents. See id. As applied, the privilege is practical; it inoculates people from being forced to contribute to their own prosecution while not unduly restricting grand juries’ ability to seek the truth. Doe argues – and the government does not meaningfully contest – that absent an exception, the act of production privilege shields Doe from complying with the grand jury’s subpoena.
2.  On the uses of and access to FBARs, In fn 5 on p. 19:
Doe points out that the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) lists the BSA as one of the tools that it uses to pursue its goals of criminal investigation. It is neither surprising nor persuasive that a law enforcement organization uses a multi‐purposed statute for law enforcement ends. We assume that insofar as the Central Intelligence Agency uses the BSA, it uses it for intelligence and counter‐intelligence purposes, while the Internal Revenue Service uses it for revenue collection purposes. Doe asserts that “[t]he government has never pointed to a ‘regulatory’ act that FinCEN performs with FBAR [Report of Foreign Bank and Financial Account] data.” Doe Brief at 35. However, other agencies also use the data obtained through the challenged reports:  
The Treasury Department shares the information it collects pursuant to the Act’s requirements with other agencies—including the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, the 
Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of Thrift Supervision—none of which are empowered to bring criminal prosecutions. 
Grand Jury Proceedings, No. 4‐10, 707 F.3d at 1271 (quoting Grand Jury Subpoena, 696 F.3d at 434).
3. On ignorance of the BSA requirement, from fn 8 on p. 29:
fn8 Although it is not necessary to our resolution of this case in which Doe has not alleged ignorance of the BSA’s recordkeeping requirements, the government’s brief acknowledges that “an individual who was unaware that he was engaging in a regulated activity would not be able to establish a risk of self‐incrimination in the first place.” Appellee Brief at 38 n.17.


  1. Thanks for your comments.

    One thing to think about is whether the U.S. should criminalize bribing of Swiss officials and business men. We do -- FCPA. And, if U.S. citizens were raiding the Swiss fisc, could and would we prosecute them. The answer is certainly that we could and we have in analogous circumstances.

    The point is that we live in a civilized world in which we all must undertake certain actions to get along. The Swiss absented themselves from the mutual obligations of nations in an interconnected world.

    If you look at the sheer economics of why the Swiss did that, you will find that the excess profits the Swiss banks made for helping their clients cheat on U.S. taxes came from the U.S. fisc. They did not earn those excess profits by bringing value but by bringing secrecy and helping the clients pay less U.S. tax than they owed. They became partners in the crime.

    The U.S. simply chooses to use whatever tools -- leverage -- it has to make the Swiss banks behave and pay something for the past misbehavior. And, for the really egregious actors, there may be criminal prosecution.

    But it is not making the Swiss enforce our law. It is simply using the tools we have to prevent the Swiss banks from actively becoming complicit in the violation of our laws.

    That may be a moral opinion, but it is a very practical opinion as to how an interconnected world must work. Just as we must do everything we can to prevent terrorists from attacking us and damaging us that way, we must prevent other offshore actors from raiding our fisc.

    If the U.S. allowed its citizens to raid the Swiss fisc with impunity, I think the Swiss would have a valid complaint against us.

    The U.S. is not perfect. But on this issue, it is right. And the Swiss are wrong.

    In my opinion.

    Jack Townsend

  2. Jack,

    With regards to potential immigration consequences of OVDI/OVDP, I have the following question for you:

    A typical OVDI/OVDP 906 Closing Agreement has the following lines:

    WHEREAS, Taxpayer underreported federal income taxes for tax years XXXX,YYYY through offshore financial arrangements (including arrangements with foreign banks, financial institutions, corporations, partnerships, trusts, or other entities);

    In fact, I was surprised to see the following lines in one of the OVDI/OVDP Closing Agreement that is posted online:
    WHEREAS, Taxpayer has established various offshore entities: Name of Entity, EIN, Date of Formation, Period in Existence, Purported Entity Classification, and Account Information associated with such entity (collectively referred to as “Offshore Entities”) for purposes of hiding income offshore through Foreign accounts;

    I am wondering if signing Closing Agreements with above statements is admission of willful violation?

  3. I assume that the question of "willful violation" relates to immigration only. I am not an immigration attorney and cannot speak to the consequences of that.

    However, just parsing the words of the first quoted provision, all it says is that the taxpayer "underreported" income. It is the second one that seems to be troubling in terms of the collateral consequences. I suggest that you consult with an immigration attorney.

    Jack Townsend


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