Monday, July 23, 2018

Attorneys and Summonses -- Some Lessons (7/23/18)

In Presley v. United States, ___ F.3d. ___, 2018 U.S. App. LEXIS 19832 (11th Cir. 2018), here, the court rejected an attempt to duck an IRS summons to a bank.  The parties wishing to avoid the summons were "a lawyer, his law firm and associated parties."  Those parties, let's call them appellants, faced "formidable" odds because of United States v. Miller, 425 U.S. 435 (1976), and United States v. Powell, 379 U.S. 48 (1964).  (Not to mention that the lawyer apparently appeared for himself and the appellants on the appeal; and the court illustrated the long odds with a sports illustration from 1980 that seems more of a detour to tell us that the author is a sports fan than really needed for the opinion.)

Challenging IRS summonses always face daunting odds because of Powell.  The Court said on the merits (cleaned up):
For IRS summonses of bank records, the "gist" of the Fourth Amendment protection is that the disclosure sought "shall not be unreasonable." This baseline requirement emanates from the interest of all citizens "to be free from officious intermeddling." But an IRS summons is not unreasonable, provided the IRS has complied with the Powell requirements. In other words, when it comes to the IRS's issuance of a summons, compliance with the Powell factors satisfies the Fourth Amendment's reasonableness requirement. 
The summonses here satisfy that standard. In fact, as we have mentioned, Plaintiffs do not contest that the summonses satisfy each Powell factor. For example, Plaintiffs do not suggest that the files containing their clients' records are not relevant to the IRS's investigation and that the summonses are not narrowly tailored. By definition, the IRS is not engaged in a "fishing expedition" when it seeks information relevant to a legitimate investigation of a particular taxpayer. In such cases, the incidental effect on the privacy rights of unnamed taxpayers is justified by the IRS's interest in enforcing the tax laws. 
Nor do Plaintiffs contend that the summonses were really just a subterfuge so the IRS could investigate their clients or invade the attorney-client privilege.  If the district court finds in the enforcement proceeding that the IRS does not in fact intend to investigate the summoned party, or that some of the records requested are not relevant to a legitimate investigation of the summoned party, the IRS could not obtain all the information it sought unless it complied with § 7609(f) [John Doe Summons procedure]. We are likewise unable to discern any other reason why the summonses should not be enforced. Because the Powell factors define the reasonableness of the summonses under the Fourth Amendment and Plaintiffs do not contest that the summonses satisfy them, our inquiry should be complete.
The Court also rejected an attempt to invoke the United States v. Gertner, 65 F.3d 963 (1st Cir. 1995), although not mentioned in the opinion by name.  Basically, the claim, such as it was, that the Government was attempting to use the regular IRS administrative summons rather than the more appropriate John Doe Summons.  The problem with that argument, if it had been properly raised, was that the investigate parties were named in the summons and there were not unknown parties the IRS was investigating.

Since we are on the subject of lawyers, I thought readers might like this press release from DOJ Tax:  Texas Husband And Wife And A Texas Attorney Indicted For Conspiring To Defraud The United States (7/19/18), here.  In that case, the indictment alleges (according to the press release) that the attorney conspired with the clients to defraud by obstructing IRS assessment and collection of the clients' taxes.  Basically, the attorney let the clients use his trust account to let the clients use as a piggy bank for their expenses in order to evade paying their taxes, with the apparent expectation that the IRS would not get to that private piggy bank.  (Note that this indictment apparently does not raise the Marinello extension from tax obstruction, § 7212(a), to the defraud conspiracy, 18 USC 371, because there apparently were some collection efforts known and reasonably inferred from the clients use of the lawyer's trust account with the apparent purpose of deflecting some attention.)

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