Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

UNITED STATES v. DEVON BANK

May 12, 1981

UNITED STATES AND JOSEPH A. DELEON, PETITIONERS,
v.
DEVON BANK, ET AL., RESPONDENTS.



The opinion of the court was delivered by: Robson, Senior District Judge.

  MEMORANDUM AND ORDER

This cause is before the court on the objections of intervening taxpayers, Curtis and Willia Betts, to the enforcement of twelve (12) Internal Revenue Service summons directed to various banks, and companies. Intervenors further request additional discovery regarding such objections. For the reasons hereinafter stated, the objections to enforcement shall be overruled except as to the question of the enforceability of summonses concerning Willia Betts and the summons directed to Caplan, Schwartz, Taub & Levin, 80 C 5722. Intervenors' requests for discovery shall be quashed. Enforcement of the remaining summonses shall be ordered as directed below.

Background

The summonses at issue in this cause were issued to banks and other companies pursuant to an investigation of potential civil and criminal tax liabilities of Curtis Betts for the years 1974, 1975, 1976, and 1977. The summonses were first issued during July and August 1979. One, directed to Caplan, Schwartz, Taub & Levin, an accounting firm, was issued in October, 1979. The present enforcement actions were filed October, 1980. On November 13, 1980, on the government's motion, these actions were consolidated. The court entered a rule to show cause why the summonses should not be enforced returnable December 4, 1980. On December 4, 1980, Curtis and Willia Betts filed their appearance and request for leave to intervene. On that same date, the Betts filed a petition to quash the order to show cause. They contend that the enforcement of the summonses would be improper for several reasons. Intervenors also filed discovery requests seeking information regarding the basis and background of the IRS investigation. On January 13, 1981, the IRS filed a hearing brief, and memoranda in support of a motion for a protective order regarding such discovery. On January 16, 1981, intervenors replied to such briefs. On January 29, 1981, the court held a limited hearing for the purpose of determining whether additional discovery should be permitted. Subsequently, both IRS and Betts filed additional briefs and memoranda. These papers, and the arguments presented in court having been considered, the matter is ready for determination.

Objections to Enforcement

Betts contends the summonses should not be enforced, or, alternatively, additional discovery should be permitted, on several grounds. First, he contends enforcement of the summonses would violate his Fourth, Fifth, Sixth, Eighth, and Fourteenth amendment rights. Second, he claims enforcement is improper because the material sought relates to tax years for which the statute of limitations has run, the IRS is guilty of laches, the IRS has not made a sufficient showing of necessity for enforcement, and the summonses are part of a continuing conspiracy of harassment in violation of Curtis Betts' civil rights by federal, state and local officials. Willia Betts claims that enforcement of the summonses as to her papers are improper. Intervenors also claim enforcement of the summonses directed to the accounting firm violates the accountant-client privilege under Illinois law.

Constitutional Claims

The constitutional objections to enforcement are invalid on their face. It is well-settled that an IRS summons directed to a third party does not violate the intervenor's right to privacy under the Fourth and Fourteenth amendments. Donaldson v. United States, 400 U.S. 517, 522, 91 S.Ct. 535, 538, 27 L.Ed.2d 580 (1970). Nor does the Fifth Amendment privilege against self-incrimination bar compelled production of records in the hands of third persons. Fisher v. United States, 425 U.S. 391, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976). Betts claims that enforcement of the summons directed to his accountant violates the Sixth amendment. He claims that compelling production from his accountant precludes his accountant and attorney from free communication necessary for legal advice. This contention is patently incorrect. There is no accountant-client privilege under Federal law. Couch v. United States, 409 U.S. 322, 93 S.Ct. 611, 34 L.Ed.2d 548 (1973). Further, the Sixth amendment right to representation by counsel is only applicable to criminal or quasi-criminal proceedings where there is a threat of imprisonment. Argersinger v. Hamlin, 407 U.S. 25, 92 S.Ct. 2006, 32 L.Ed.2d 530 (1972). The constitutional right to counsel is not the equivalent of the attorney-client privilege.

As for the contention that enforcement would be "cruel and unusual punishment" in violation of the Eighth Amendment, however unpleasant IRS investigations may be, they are not punishments for violations of the criminal law.

Collateral Estoppel

The IRS contends that the Betts are barred from raising certain defenses because these defenses were already litigated and determined in favor of the government in United States v. Bank of Three Oaks, et al., Civil Action No. K80-66, Misc. 8, in the United States District Court for the Western District of Michigan, Southern Division. The Betts do not dispute that many of the same issues, for example, statute of limitations, laches, delay in enforcement, were raised and decided in that proceeding. They contend, however, that application of collateral estoppel in these circumstances is inappropriate because they lacked a full and fair opportunity to be heard in Michigan.

The doctrine of collateral estoppel is applicable when the party against whom it is invoked had a full and fair opportunity to litigate the issues in a prior proceeding. Parklane Hosiery Company v. Shore, 439 U.S. 332, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979); Speaker Sortation Systems v. U.S. Postal Service, 568 F.2d 46, 48 (7th Cir. 1978).

According to the document attached to the government's memoranda in this action, Betts did appear in the Michigan action, was represented by counsel, and availed themselves of the opportunity to challenge the summonses at issue there. However, application of collateral estoppel is unnecessary in this cause. Upon independent assessment, the court agrees with the legal conclusions of the Michigan Court regarding several of these same issues. It is clear that the Michigan court determined that the IRS summons might be enforced even where the tax years in question might be covered by the three-year statute of limitations for recovery of taxes. This court agrees. The IRS may investigate through the summons procedure to determine whether any exceptions to the three-year statute of limitations, i.e., fraud, are applicable, 26 U.S.C. § 6501(a)(c) (1976); United States v. Powell, 379 U.S. 48, 85 S.Ct. 248, 13 L.Ed.2d 112 (1964); Ryan v. United States, 379 U.S. 61, 85 S.Ct. 232, 13 L.Ed.2d 122 (1964). The Michigan court also determined that delay in initiation of the enforcement action does not preclude enforcement of the summons where neither the intervening taxpayer nor the third-party recordholder has shown any prejudice resulting from the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.