Thursday, April 2, 2015

US Attorney Declines House Republicans Invitation to Present Lerner Contempt Over Fifth Amendment Claim to Grand Jury (4/2/15)

The US Attorney sent a letter, here, to the House stating that he has determined that Ms. Lerner validly invoked here Fifth Amendment right to remain silent and therefore declining to present the matter to a federal grand jury.

Although other issues are discussed, the core conclusion is that Ms. Lerner did not waive her Fifth Amendment privilege.  The key undisputed facts from the letter are:
Ms. Lerner appeared at the hearing on May 22, 2013, and gave an opening statement that included the following: 
I have not done anything wrong. I have not broken any laws. I have not violated any IRS rules or regulations, and I have not provided false information to this or any other congressional committee. 
And while I would very much like to answer the Committee's questions today, I've been advised by my counsel to assert my constitutional right not to testify or answer questions related to the subject matter of this hearing. After very careful consideration, I have decided to follow my counsel's advice and not testify or answer any of the questions today.
The question is whether Ms. Lerner's general assertions of innocence waived the privilege that she clearly had.  Here is the US Attorney's legal analysis:
B. Ms. Lerner Did Not Waive Her Fifth Amendment Privilege. 
The Supreme Court has made clear that witnesses who testify before Congress are protected by the Fifth Amendment to the Constitution. See Quinn, 349 U.S. at 161. Thus, it is undisputed that Ms. Lerner had the right not to testify at the Committee hearing, given the possibility that her answers could be used against her in a subsequent criminal proceeding. See, e.g., Hoffman v. United States, 341 U.S. 479, 486 (1951); Minnesota v. Murphy, 465 U.S. 420, 426 (1984); United States v. Balsys, 524 U.S. 666, 672 (1998). The only question is whether she waived that right by giving her opening statement on May 22, 2013. 
In finding that Ms. Lerner waived her Fifth Amendment privilege, the Committee focused on her assertions that she had done nothing wrong, had broken no laws, had violated no IRS rules, and had provided no false information to Congress. Citing the Supreme Court's decisions in Brown v. United States, 356 U.S. 148, 154-55 (1958), and Mitchell v. United States, 526 U.S. 314, 321 (1999), the Committee found that these "four specific denials" amounted to voluntary testimony about the subject matter of the hearing, which Ms. Lerner could not then refuse to be questioned about. See Committee Report, at 11, 36-37. 
We respectfully disagree with this conclusion, however, because case law establishes that Ms. Lerner's general denials of wrongdoing did not amount to "testimony" about the actual facts under the Committee's review. In Brown, the defendant in a civil immigration proceeding voluntarily took the stand and gave substantive testimony on direct examination, but refused to answer pertinent questions about that testimony on cross-examination. 356 U.S. at 150-52. The Court upheld the defendant's contempt conviction for that refusal, noting that a party may not put a "'one-sided account of the matters in dispute" before the trier of fact, which could not be tested by adversarial cross-examination. Id at 155. See also Mitchell, 526 U.S. at 321 (noting that "a witness, in a single proceeding, may not testify voluntarily about a subject and then invoke the privilege against self-incrimination when questioned about the details"). 
Where witnesses do not offer substantive testimony, however, and instead merely make general denials or summary assertions, federal courts have been unwilling to infer a waiver of the Fifth Amendment privilege. See, e.g., Isaacs v. United States, 256 F.2d 654. 656-57, 660-61 (8th Cir. 1958) (witness before grand jury who repeatedly stated that he had committed no crime did not waive his Fifth Amendment privilege); Ballantyne v. United States, 237 F.2d 657, 665 (5th Cir. 1956) (concluding that "the United States Attorney could not, by thus skillfully securing from appellant a general claim of innocence, preclude him from thereafter relying upon his constitutional privilege when confronted with specific withdrawals"); United States v. Hoag, 142 F. Supp. 667, 669 (D.D.C. 1956) (witness who generally denied being a spy or saboteur before Congressional committee did not waive Fifth Amendment privilege). 
In her opening statement before the Committee, Ms. Lerner offered no account or explanation of what occurred and revealed no facts about the matters under the Committee's review. Instead, she made general assertions lacking substantive content. She did not purport to explain why she believed she was innocent or why any information she had previously provided was not false. This matter therefore appears materially indistinguishable from cases like Isaacs, Ballantyne, and Hoag, in which defendants were held not to have waived Fifth Amendment protection simply by asserting general innocence or even denying guilt of specific offenses. 
There is likely an additional barrier to finding that Ms. Lerner waived her Fifth Amendment privilege through her general denials of wrongdoing. Unlike the civil defendant in Brown and defendants in criminal cases (who similarly subject themselves to wide-ranging cross-examination if they voluntarily take the stand), Ms. Lerner was an ordinary witness who had been compelled to testify by subpoena. The Supreme Court has held that "where the previous disclosure by an ordinary witness is not an actual admission of guilt or incriminating facts, he is not deprived of the privilege of stopping short in his testimony whenever it may fairly tend to incriminate him." McCarthy v. Arndstein, 262 U.S. 355, 359 (1923); see also, e.g., United States v. Powell, 226 F.2d 269, 276 (D.C. Cir. 1955); accord Rogers v. United States, 340 U.S. 367, 368, 373 (1951). Ms. Lerner did not testify to any incriminatory facts during her opening statement but, to the contrary, asserted her innocence. Thus, like the defendant in Arndstein, she had the right to "stop[ ] short" after making her self-exculpatory statement. 
The Committee found that Ms. Lerner's opening statement was the equivalent of the "voluntary" testimony at issue in Brown, presumably because she did not have to make the statement at all. Although in theory this could render the Arndstein line of cases inapplicable, that conclusion is doubtful. Ms. Lerner was compelled by subpoena to appear before the Committee on May 22, 2013 after she declined an invitation to appear voluntarily and informed the Committee that she would invoke her Fifth Amendment privilege. Courts have not found waiver under such circumstances. See, e.g., Hoag, 142 F. Supp, at 669-71.
In the referral, the House cited two cases, Brown v. United States, 356 U.S. 148, 154-55 (1958), and Mitchell v. United States, 526 U.S. 314, 321 (1999).  The US Attorney distinguishes those cases in a way that is quite persuasive to me.  However, readers might want to read the opinions.  Brown is here: and Mitchell is here.

In order to assess the merits of the US Attorney's assessment that Ms. Lerner had properly invoked and not waived her Fifth Amendment privilege, the other cases cited should be read.  Here they are in the order presented in the letter.

  • Isaacs v. United States, 256 F.2d 654. 656-57, 660-61 (8th Cir. 1958), here.
  • Ballantyne v. United States, 237 F.2d 657, 665 (5th Cir. 1956), here.
  • United States v. Hoag, 142 F. Supp. 667, 669 (D.D.C. 1956), here.
  • McCarthy v. Arndstein, 262 U.S. 355, 359 (1923), here.
  • United States v. Powell, 226 F.2d 269, 276 (D.C. Cir. 1955), here.
  • Rogers v. United States, 340 U.S. 367, 368, 373 (1951), here.

As I say, I find the US Attorney's position to be a fair determination of the law.  Of course the partisans in the House see it otherwise and see it as a nefarious conspiracy among the US Attorney and his prosecutors and the White House.  See David van den Berg, DOJ Declines to Prosecute Lerner for Contempt of Congress, 2015 TNT 63-1 (4/2/15) (no link available).  The article cites the following (with the numbering supplied by me for ease of reference):
[1] "Mr. Machen attempted to absolve Ms. Lerner of her actions by substituting his judgment for that of the full House of Representatives," Chaffetz said. "It is unclear whether the Administration directed Mr. Machen not to prosecute Lois Lerner, or whether he was motivated by an ideological kinship with IRS's leadership." 
[2] Boehner spokesman Michael Steel said that by choosing not to prosecute Lerner for contempt, the Obama administration is again sweeping "IRS targeting of taxpayers for their political beliefs under the rug." 
[3] "But unaccountable federal bureaucrats using their power to attack the First Amendment strikes at the heart of our democracy, and the American people deserve the truth," Steel said. "The White House still has the opportunity to do the right thing and appoint a special counsel to examine the IRS's actions." 
[4] Peter J. Roskam, R-Ill., chair of the House Ways and Means Oversight Subcommittee, said in a release 2015 TNT 63-23: Congressional News Releases that the decision not to prosecute Lerner for contempt doesn't clear her of wrongdoing. 
[5] "The evidence thus far indicates that Mrs. Lerner pursued an inappropriate and abusive agenda against American citizens using the power and authority of the IRS to target those with whom she disagreed," Roskam said. "We will continue to investigate all of the facts, hold her accountable for any criminal wrongdoing to which she was a party, and make commonsense reforms at the IRS to restore trust and ensure that there is no Lois Lerner 2.0."
Here are my comments on these comments:
[1] The "judgment of the House of Representatives" does not and should not determine when a case should be presented to a grand jury.  This particular instance is the classic reason for that.  The House acted as a lynching mob out to get someone, preferably the President (their President as well as ours).  In that environment as was clearly shown by in the actions of Joe McCarthy and echoed in these actions, thank God there is someone else who determines whether the machinery of our prosecution system should be launched.  And note the backhanded suggestion that Administration was pulling the strings here.  Well, of course, the US Attorney is part of the executive branch and thus of the "Administration."  But the politician's point was not to state that the executive branch was involved but suggest that the White House made a political decision and imposed it on the US Attorney, which, of course, he has absolutely no evidence of (at least he does not present any such evidence or even claim of such evidence in an environment where, if he had any real evidence of White House involvement, he would have so indicated). 
[2]  Declining to present the Fifth Amendment issue is in no way a decision not to make a criminal case against Ms. Lerner on the merits if a criminal case can be made.  The Republicans have yet to make a case that any responsible prosecutor -- Democrat or Republican -- would prosecute. 
[3] Same.  As to the special prosecutor, at this point because of all the mischaracterizations by the Republicans, I personally wish one had been appointed.  But, would the Republicans have believed him or her if he or she disagreed with their view of the universe?  I think we all know the answer to that. 
[4] Finally, a Republican can make a clear statement that is absolutely correct.  The US Attorney's decision does not clear Ms. Lerner of wrongdoing. 
[5] This statement is on the merits.  I think he stretches the evidence of which I am aware a bit too far.  I am glad he is continuing the investigation.  But, I wonder if he is concerned that the investigation of Benghazi might distract from the publicity of his further investigation.
Finally, moving to the issue of whether Ms. Lerner is guilty of some crime or, more importantly, whether persons in the chain between her and the White House have some culpability, it seems to me that this Fifth Amendment diversion should redirect Republicans' focus to that issue and how they can prove it (they have yet to prove it with facts, instead relying on politically charged claims, suspicions and paranoia (if they believe the claims they make).  It is really not important whether Ms. Lerner ever gets prosecuted.  What is important in light of the fantastic claims that the Republicans have made a centerpiece of their attacks on the Administration is whether there were persons between Ms. Lerner and the White House who are culpable.  All the Republicans have to do is obtain immunity for her and they will unlock the skullduggery (if it exists).  I have surmised before that the Republicans will not grant immunity because they already know there is no skullduggery to uncover, so they are better politically served by not obtaining immunity thus permitting them to make their fantastic unproven claims to whip up the base.  Hey, isn't it all about politics?

But, in the event it is not about politics but an honest attempt to discover the facts so that they can shape appropriate legislation, then I anxiously await the immunity grant so that we can hear from Ms. Lerner and Congress can then draft and enact appropriate legislation.  And I am still waiting for appropriate legislation coming from the Benghazi investigations (but then, of course, they claim they don't have the facts about how the President and his minions put their spins on the attack).


  1. a good read :

  2. FATCA: Swatting Flies With Atom Bombs:
    Possible inflation of the offshore tax evasion
    problem and the staggering costs of the Foreign Account Tax Compliance
    Act are causing even the most ardent advocates of information sharing
    and ending bank secrecy to question the U.S. approach.“For the U.S. to ask countries around the world to spend billions
    in implementation costs to deliver less than $1 billion per year is,
    economically, complete nonsense,” said Martin Naville, CEO of the
    Swiss-American Chamber of Commerce. He referred to FATCA as the least
    considered program in history and “mind boggling” in its unilateralism.
    “The net value of FATCA for the U.S. is probably negative,” said
    Naville, who added that tax compliance is a must but that there are
    better ways to achieve it.
    But it goes after Fat Cats! Don’t you get our clever pun? And
    besides, how can we go after international money launderers without
    making it a crime to commit personal finance abroad?

    Related: Wall Street Journal, Checking the IRS Overseas (Via the TaxProf).
    “Even the Obama Administration says the law would capture only $870
    million a year in additional tax revenue, which is probably overstated
    given changes in behavior by Americans and their overseas employers.”

  3. Thanks for highlighting these SOB cases. I certainly will not disagree with you that most taxpayers who enter into these types of transactions should have known better... if something seems too good to be true, it probably is. The in pari delicto reasoning is interesting, although a simple burden-shifting analysis would say that the taxpayer, not the government (and thereby the taxpayers), should bear the burden for the mistake of a tax shelter victim, and the taxpayer can later have their "day in court" against the accountants and attorneys who put them in that position.

    However, it is good to see courts backing off their strict stance against SOB cases. While I agree most taxpayers who engaged in these types of tax shelters would be sophisticated, that is not necessarily always the case. I was involved in picking up the pieces with respect to a SOB assessment. The husband had sold his business which was selling water coolers (sophisticated? not really), and was convinced by some unscrupulous attorneys that he could avoid the tax by paying huge sums to the firm to engage in a "legal" tax shelter. He was told everything was completely legal. Long story short - the assessment was made 10 years later, after the husband had died, the TEFRA notices were sent to an old address so the TMP's appeal rights were lost, leaving the wife with millions of dollars of liability, about half of which was the 40% penalty and interest that had accrued over the 10 years the IRS kept the case on hold. We tried to pursue penalty abatement with the IRS, especially given their own delays, the wife's innocence, and the husband's reliance on the attorneys who assured him everything was legal. The IRS refused to budge (the matter never got to the Tax Court). Thankfully we were able to obtain innocent spouse relief for the wife (and the husband was dead long ago). The IRS actually lost out on a couple million dollars, which might have been paid had they granted penalty abatement. Now they are getting nothing due to innocent spouse complete relief.

    In these types of cases, the IRS has taken too strict a stance on penalty abatement. The 40% penalties are usually very harsh, since most taxpayers who engage in SOB shelters are sheltering millions. While the penalty is valid in theory to deter taxpayers from engaging in transactions that are too good to be true, it may not be appropriate in all cases. Similarly, while it may be valid to hold the taxpayer responsible for the tax portion, the IRS should (and does) pursue the real wrongdoers - the unscrupulous accountants and attorneys who sell these - for the additional sums.

  4. Sandra M.:

    Thanks for your thoughtful comment. I recommend it to readers.

    Jack Townsend


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