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UNITED STATES v. KEMPER MONEY MARKET FUND

December 13, 1983

UNITED STATES OF AMERICA AND DAVID P. SWIRE, SPECIAL AGENT, INTERNAL REVENUE SERVICE, PETITIONERS,
v.
KEMPER MONEY MARKET FUND, INC., RESPONDENT, V. CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY, RESPONDENT, V. FIRST NATIONAL BANK OF HIGHLAND PARK, RESPONDENT, V. NORTHERN TRUST BANK, RESPONDENT.



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

MEMORANDUM OPINION AND ORDER

On October 4, 1983, a hearing was held on the petition of the Internal Revenue Service ("IRS") to enforce a number of IRS summons issued against various financial institutions at which intervenor-taxpayers Robert L. Wenz and Merrick Consultants, Ltd. have accounts. These taxpayers have intervened in the summons enforcement proceeding pursuant to 26 U.S.C. § 7609(b)(1).

  (1) the investigation will be conducted pursuant to a
  legitimate purpose

(2) the inquiry may be relevant to that purpose

  (3) the information sought is not already within the
  Commissioner's possession, and
  (4) the administrative steps required by the Code have been
  followed — in particular, that the Secretary or his delegate,
  after investigation, has determined the further investigation
  to be necessary and has notified the taxpayer in writing to
  that effect.

658 F.2d at 536. The government ordinarily proves these four elements by submitting affidavits of the agents involved in the investigation.

If the government meets its burden of establishing a prima facie case, the district court should order the respondent to show cause why the summons should not be enforced. At this stage of the proceeding, the burden of production and proof has shifted to the taxpayer, and this burden is a "heavy one". 658 F.2d at 538. The taxpayer must establish that enforcement would constitute an abuse of the court's process. He must prove bad faith on the part of the government by showing that the government has abandoned in an institutional sense its pursuit of possible civil penalties. 658 F.2d at 538 (citations omitted). The taxpayer must do more than just produce evidence which would call into question the government's prima facie case. The taxpayer must allege specific facts from which the court might infer a possibility of wrongful conduct by the government. Mere allegations of bad faith are not sufficient.

To meet this burden, the taxpayer is entitled to a limited amount of preliminary discovery. The taxpayer may discover:

(1) the identities of the investigating agents,

(2) the date the investigation began

  (3) the dates the agent or agents filed reports recommending
  prosecution,
  (4) the date the district chief of the Intelligence Division or
  Criminal Investigation Division ...

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