1970. Petitioners have filed their motion to quash subpoena duces
tecum and notice to take deposition and to limit discovery.
On July 27, 1970, attorneys for intervenors and petitioners
entered into an agreed stipulation, wherein they stipulated that
the hearing on the 31st day of July, 1970, should be limited to
the question of determining whether petitioners' motion to quash
the taking of depositions should be granted or denied.
Notwithstanding the stipulation, at the hearing on July 31, 1970,
both petitioners and intervenors introduced evidence bearing on
the merits of the petition, as well as the motion to quash the
subpoena duces tecum and the taking of oral depositions. The
Court has considered the entire evidence presented.
As was stated in United States v. Salter, 432 F.2d 697 (1st
Cir., October 15, 1970), if respondent can show that the
administrative summons was not issued for the purpose of
determining civil tax liability, the summons cannot be enforced
by the district court. However, respondent should be required to
do more than allege an improper purpose before discovery is
ordered in a proceeding of this type. Some evidence supporting
respondent's allegations should be introduced. The general
solution would probably be for the district court to proceed
directly to a hearing at which, if desired, the summonee could
examine the agent who issued the summons concerning his purpose.
The court could then, by observation and, where necessary, its
own questioning of the agent, make its own determination of
whether exploration, as by discovery, seemed to be in order.
At the hearing the agent issuing the summons did appear and was
examined by the Court with regard to the purpose concerning
issuance of the summons. The evidence developed that the summons
was issued for the purpose of determining the civil tax liability
of the taxpayer in question, and such being the case, the summons
is valid on that ground alone, even though the investigation
might lead to criminal prosecution (which was not established in
this case). As long as the determination of civil liability is at
least one purpose of the summons, it is valid. See Salter, supra.
As was stated by way of dictum in Howfield, Inc. v. United
States, 409 F.2d 694 (9th Cir., 1969), administrative summonses
may be used even where their purpose is allegedly to uncover
crime where no criminal case is actually pending against the
Considering the entire evidence presented, the sole purpose of
the subpoena is to determine the ultimate tax liability of the
taxpayer. There was no evidence introduced which would even tend
to remotely show that the summons was issued for the purpose of
prosecution. The summons was properly issued and compliance
therewith will be enforced.
Next considering petitioners' motion to quash the subpoena
duces tecum and notice to take deposition — as previously stated,
more must be shown than the mere allegation of the intervenor
that one purpose for the subpoena may be for prosecution. Here
there was no evidence to show that the basis for the issuance of
the summons was for the purpose of prosecution. Assuming the
evidence at the deposition or the documents obtained by the
subpoena duces tecum should establish that there is also a
criminal investigation or that prosecution may be eminent, this
would not invalidate the summons issued, since at least one of
the purposes of the subpoena is the determination of civil tax
liability of the taxpayer. For the foregoing reasons, the
petitioners' motion to quash subpoena duces tecum and to take
deposition and to limit discovery will be and the same is hereby
allowed, and intervenors' motion to take deposition and subpoena
duces tecum directed to Joseph D. Henry and Robert Schulman will
It is, therefore, the order of this Court that petitioners'
motion to quash subpoena duces tecum with notice to
take deposition and to limit discovery be and the same is hereby
allowed and the notice to take deposition and the subpoena duces
tecum be and the same are hereby quashed.
It is the further order of this Court that the respondent
National State Bank and its officers and employees obey the
summons, Treasury Form 2039, heretofore issued by petitioner John
S. Wills, and the respondent is directed to appear before John S.
Wills to testify and produce records relating to the tax
liabilities of the taxpayer, Dr. George Green, at a time
reasonable as may be determined by the said John S. Wills or his
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