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United States v. Turner

decided: June 12, 1973.


Castle and Moore,*fn* Senior Circuit Judges, and Cummings, Circuit Judge.

Author: Castle

CASTLE, Senior Circuit Judge:

Appellant Herbert E. Turner appeals from an order of the district court granting enforcement to an Internal Revenue Service summons compelling him to produce the names and social security numbers of clients whose tax returns he had prepared for 1970-1971 so that the Service could determine the accuracy of these returns.

On September 28, 1972, Revenue Agent Burnis Brown served a summons upon Turner which ordered him to produce the names, addresses and social security numbers of the persons whose income tax returns he had prepared for 1970 and 1971. Brown petitioned the district court for enforcement of the summons on December 18, 1972, alleging that he was conducting an investigation of "the correctness of income tax returns prepared by Herbert E. Turner for his customers and clients for the taxable periods 1970 and 1971. . . ." Turner's response to this petition alleged as affirmative defenses that the investigation was being conducted to obtain evidence for a criminal proceeding against him, that the summons was too vague, and that the production of the documents would violate certain constitutional rights. Turner also moved under the Federal Rules of Civil Procedure for discovery of all reports and communications stating and reflecting upon the reasons for investigating him, he filed a notice of deposition of Agent Brown. On February 16, 1973, the district court denied the requested discovery and quashed the notice of deposition.

On February 21, 1973, the court held a hearing on the petition for enforcement of the summons at which Turner and his counsel were allowed to cross-examine the Internal Revenue agents involved with his case. Myron Braunstein, a supervisory IRS agent, testified that the planned examination of the returns prepared by Turner is a facet of the Service's Tax Preparers Project, a nationwide program with three objectives: (1) the protection of uninformed and uneducated taxpayers who rely on tax preparers, (2) the identification of unscrupulous and incompetent tax preparers and the attempt to achieve their observance of the law through either warnings or prosecution, and (3) the collection of additional taxes or the refund of overpayments due on improperly prepared returns. The principal means of deciding to investigate whether the returns compiled by a tax preparer are accurate, Braunstein testified, is through "shopping," a process by which an agent visits a tax preparer and requests the preparation of a tax return from a standard set of facts. If the IRS determines that the return obtained through "shopping" is inaccurate, it may seek to find out whether this inaccuracy pervades the other returns prepared by that person. According to Braunstein, the Preparers Project is directed particularly at individuals who subscribe to no "code of professional ethics"; accordingly, attorneys, CPA's, and practitioners enrolled pursuant to IRS regulations are not "shopped" to determine the accuracy of their work.

Braunstein also represented that summonses had been issued to about 175 tax preparers in the Chicago area to obtain the names of their clients after an initial "shopping" process, and that no criminal prosecution of Turner had been recommended. Even if Turner signed the returns he prepared, Braunstein said, it would be almost impossible for the IRS to discover these returns among the 9.5 million filed in Chicago for the years in question without the names of the taxpayers involved.

Agent Burnis Brown testified that he was directed by his superiors to deliver a summons to Turner to obtain the names of the persons whose 1970 and 1971 returns he had prepared, and that he assured Turner that there was no criminal proceeding pending against him. Rosemary Jackson, an IRS trainee who had accompanied Brown, verified his account. Although Turner's counsel had indicated that Brown had told his client when he delivered the summons that the information was to be used in a criminal prosecution, neither Brown nor Jackson recalled any such statement.

Turner did not testify at the hearing. His counsel, however, represented to the court that his client had been subjected to harassment during previous years by the IRS.

The district court granted enforcement of the summons at the close of the hearing. The court delivered no opinion, but indicated in its remarks that the names of Turner's clients could be revealed without violating his privilege against self-incrimination, that the IRS had a valid civil purpose in seeking production of the names, and that the respondent had not proven his affirmative defenses. The court also denied Turner's attempts to learn the name of the agent who had "shopped" him, as well as his renewed motions for discovery of documents. This court granted a stay of the district court's order pending appeal on March 2, 1973, and scheduled this case for expedited argument.

Turner poses essentially four arguments on this appeal: (1) the district court erred in drastically restricting his right to discover the motives of the IRS in summoning his records, (2) the criminal purpose and self-incriminatory demands of the summons required the district court to deny enforcement of it, (3) the summons was illegally broad, and (4) the summons should have been denied because it was an instrument of government harassment.

(1) Discovery

A summons enforcement proceeding, like any other civil action, is governed by the Federal Rules of Civil Procedure. Fed. R. Div. P. 81(a)(3). Turner argues on this appeal that the liberal discovery provisions of these rules should have been made available to enable him to gather evidence in support of his defenses to the summons. Specifically, he complains about his inability to review materials related to the IRS's reasons for seeking the names of his clients.

Our examination of the arguments presented by Turner indicates that he seeks discovery to aid him in establishing his claims that the summons was issued to obtain evidence against him for a criminal prosecution and/or that it was issued only to harass him. These two defenses asserting the bad faith of the Internal Revenue Service will be successful only if Turner can show that prosecution has been recommended or initiated against him, or if he can negate the existence of any valid civil purpose on the part of the IRS in issuing the summons. Couch v. United States, 409 U.S. 322, 326, 93 S. Ct. 611, 614-15, 34 L. Ed. 2d 548 (1973), Donaldson v. United States, 400 U.S. 517, 532-33, 27 L. Ed. 2d 580, 91 S. Ct. 534 (1971), United States v. Moriarty, 435 F.2d 347, 359 (7th Cir. 1970). Thus, even though the summons might eventually produce criminal evidence against Turner or have harassing aspects, it may issue if it is also directed at ascertaining civil tax liabilities.

The federal rules allow a district court to suspend or limit discovery pursuant to rule 81(a) (3) in the interest of obtaining an expedited disposition of a summons proceeding, 7 Moore's Federal Practice para. 81.01(6) at 4413 (2d Ed. 1972), and our function as a reviewing court is to determine only whether the court has abused its discretion. United States v. National State Bank, 454 F.2d 1249, 1252 (7th Cir. 1972), United States v. Bell, 448 F.2d 40, 42 (9th Cir. 1971). Although the district court denied the production of government documents in this case, it did permit the in-court examination of the agents involved in summoning the names of Turner's clients. It has been recognized that such an expedited substitute for complete discovery is an acceptable alternative. United States v. National State Bank, supra, United States v. Bell, supra, United States v. Bowman, 435 F.2d 467, 469 (3d Cir. 1970), Kennedy v. Rubin, 254 F. Supp. 190, 194 (N. ...

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