Petition for Cert filed in FBAR Required Records Case (1/18/13)

As readers know, taxpayer have won some of the temporary battles in required records cases, but have always lost the war at the court of appeals level.  (For blogs on this subject, click on the label below.)

One of the losers in the court of appeals has now filed a petition for certiorari in the Supreme Court.  The petition is here.  The lead attorney for the petitioner is Paul D. Clement, a formidable Supreme Court advocate and former Solicitor General.  His bio is here and his Wikiepdia entry is here.  Mark Matthews, a prominent player in the offshore account area, is also on the brief.  Mark's bio is here.

Here is the introduction to the petition:

This case presents an exceptionally important question about the relationship between two aspects of this Court’s Fifth Amendment jurisprudence: the “act-of-production privilege” and the “required records doctrine.” The government served Petitioner with a subpoena demanding a record of any foreign banking interests he may have held during a specified period. The Bank Secrecy Act presumptively requires all taxpayers, on pain of criminal penalty, to create, retain, and file records of their foreign banking interests. Because Petitioner has not disclosed any such interests during the relevant period, the government concedes, as it must, that the act of producing the records it requests would incriminate Petitioner. For that reason, there is no dispute that Petitioner has asserted a valid Fifth Amendment privilege under the Court’s “act-of-production” cases, which hold that the compelled act of producing papers may be protected by the privilege, even if the contents of the papers are not, when the act of production itself could reveal incriminatory information. 

Nonetheless, the Court of Appeals accepted the government’s contention that the “required records doctrine,” a 65-year-old doctrine necessitated by a conception of the Fifth Amendment that the Court has long since abandoned, “overrides” otherwise valid invocations of the privilege against self-incrimination, under the fiction that an individual waives his constitutional privilege whenever he engages in any conduct for which records must be kept. That decision is part of a pattern of recent Court of Appeals decisions treating the judicially created and arguably  [*2]   obsolete required records doctrine as an “exception” to the Constitution’s Fifth Amendment privilege in materially analogous contexts.

As those decisions reflect, lower courts are in serious need of this Court’s guidance in this area of increasing importance in light of the government’s recent and aggressive enforcement tactics. The notion that the required records doctrine provides an exception to a valid invocation of the act-of-production privilege is fundamentally incompatible with the bedrock principle that the Fifth Amendment privilege is unequivocal and admits of no exceptions. Yet Courts of Appeals have repeatedly and mistakenly concluded that this Court’s decision in Shapiro v. United States, 335 U.S. 1 (1948), compels that untenable conclusion. 

Shapiro, which did not involve the act-of-production privilege at all and was based on a now-abandoned conception of the Fifth Amendment privilege, does no such thing. Properly understood, the required records doctrine Shapiro articulated was never an exception to the Fifth Amendment at all, but was merely a means of deciding whether records were “public” or “private” for purposes of determining whether their contents were protected by the privilege in the first place under the rules of the ancien régime. Whatever force that doctrine once had, it is largely obsolete now that the Court no longer considers the contents of any records protected by the privilege. Instead, the Fifth Amendment is now construed to protect not the contents of papers, but the testimonial character of the act of production, which does not turn on the “public” versus “private”  [*3]  nature of the underlying documents. It would make no sense at all if that act-of-production privilege, which is explicitly premised on the notion that the contents of the records being produced are not entitled to Fifth Amendment protection, could be overcome by invoking a doctrine designed to determine whether or not the contents of records are protected. 

Nonetheless, rather than acknowledge that the required records doctrine is conceptually orphaned and thus largely irrelevant, Courts of Appeals have repeatedly accepted the government’s invitation to convert it into an “exception” to trump valid invocations of the privilege. Worse still, they have done so in the context of a raft of investigations under the Bank Secrecy Act, which presumptively imposes record-keeping requirements on every taxpayer, and which Congress explained was intended to facilitate criminal investigation, not commercial regulation. This context is quite unlike the traditional required records context, in which the act of production reveals nothing more than the already public fact of participation in a regulated industry for which record-keeping is required. Here, the government is attempting to force citizens to reveal the presence or absence of records, in circumstances in which the very act of production will reveal incriminating facts not otherwise public that will serve as the lynchpin of the contemplated prosecutions. This is the precise situation in which the Fifth Amendment act-of-production privilege applies. 

[*4] 

Treating that privilege as trumped by the obsolete required records doctrine gets matters exactly backwards. Even on its own terms, the required records doctrine cannot be applied to compel production of records required of every taxpayer for criminal investigatory, not regulatory, reasons. But even if the doctrine did apply, it would not—and could not—override the act-of-production privilege that both the government and the lower courts necessarily concede exists here. 

Because the lower courts have viewed this purported exception to the Fifth Amendment as compelled by Shapiro, only this Court can correct this error. And the government’s increasing resort to this tactic in Bank Secrecy Act prosecutions makes the need for the Court’s review particularly acute. This case presents an ideal vehicle to correct this recurring misreading of Shapiro because Chief Judge Holderman rejected the government’s position, and the case came to the Seventh Circuit on the government’s appeal of this clean legal issue. In cases in which District Courts accept the government’s argument, by contrast, compelled production of the records will be ordered, and it will be difficult for this issue to be presented on appeal. This Court should grant certiorari to resolve the pervasive confusion in this area of ever increasing importance.

And,  I offer a couple of  snippets from the reasons for granting the writ and my comments:

It is bedrock constitutional law that the Fifth Amendment privilege against self-incrimination is unequivocal and admits of no exceptions. Thus, when the distinct act of producing records under compulsion is testimonial and incriminating, wholly independent of the contents of the records, neither the required records doctrine nor anything else short of a grant of immunity can overcome the privilege.

The petition then argues that the required records doctrine is not to the contrary.  I am not sure of that.  I think the required records doctrine is one of those results at the intersection of the law and practicality.  Constitutional guarantees should be read literally, but not too literally.  (That notion perhaps animated the health care decision of the Supreme Court but not the gun decision.)  That is just an observation as to how it works, but not an argument that the required records doctrine should survive.

Good luck to the petitioner!

I wonder, as a work around for the Government, if it could use the much more intrusive search warrant to achieve some of the same goals at least in some of these cases.  Of course, the more sophisticated players in this game studiously avoided receiving any bank statements, so a search warrant against them would be ineffective, even if the Government could meet the particularity requirements for a search warrant.

And, I  have noted before in discussing the foregone conclusion notion that, in much the same way, also overrides the Fifth Amendment, that there should be some overlap between the foregoing conclusion for subpoenas and the particularity requirement for compulsory process such as grand jury subpoenas and IRS summonses.  In other words, in order not to discourage use of a more intrusive process (search warrants), the less intrusive process (subpoenae or summonses) should be encouraged if the Government could otherwise obtain a search warrant.  I think some of the cases  nose around the particularity standard in testing foregone conclusion, but don't think they have embraced it as I have articulated it.

Addendum 1/28/13 1:40pm:


The following are excerpts from Jeremiah Coder, Saving the Fifth Amendment from an Aging Loophole, 2013 TNT 15-2 (1/23/13):

The petition cites a law journal article Justice Samuel Alito wrote in the 1980s while serving as a deputy assistant attorney general at the Justice Department, in which he questioned the vitality of the required records doctrine. Alito noted that the required records doctrine developed when the Court focused on a document's content as the basis for applying privilege, while the new act of production standard that the Court developed in Fisher v. United States, 425 U.S. 391 (1976), drew upon the idea that producing records in response to a subpoena can have a communicative aspect. That "the act of producing records may amount to testimonial self-incrimination . . . is no less true for required records than for records of any other type," Alito wrote. 

A central question is to what extent the Supreme Court's iteration of the required records doctrine in Shapiro remains binding precedent. The petitioners argue that Shapiro has long ceased to provide a compelling reason for elevating a record-keeping requirement above a constitutional privilege. The required records doctrine as outlined in Shapiro never existed as an exception to the Fifth Amendment but "was merely a means of deciding whether records were 'public' or 'private' for purposes of determining whether their contents were protected by the privilege in the first place," according to the petition. Changes in the Supreme Court's Fifth Amendment jurisprudence since 1948 have obsoleted the required records doctrine because the foundation for the privilege lies in the "testimonial character of the act of production" rather than a basis for a document's content, the petition says. 

The IRS's crusade against offshore tax evasion involves circumstances different from what the Shapiro Court grappled with, the petition argues. The required records doctrine was accepted because it provided access to publicly available materials of which the government already had knowledge because the individual was participating in a regulated commercial industry, but the Bank Secrecy Act regime covers every taxpayer and is a tool for enforcing criminal laws. "The government is attempting to force citizens to reveal the presence or absence of records, in circumstances in which the very act of production will reveal incriminating facts not otherwise public that will serve as the lynchpin of the contemplated prosecutions," the petition argues. 

Without Supreme Court intervention, the government will continue to aggressively invoke "the required records doctrine in hundreds of cases like this one to compel individuals to disclose their private foreign banking activities in the hope of uncovering criminal violations," the petition says.